Sony First-Quarter Profit Soars on Digicam Sales, Weak Yen
Sony said on Thursday its quarterly profit more than trebled after strong digital camera sales and a softer yen far outstripped losses at its game unit.
Sony , in the final year of a three-year turnaround plan led by Chief Executive Howard Stringer, has seen its PlayStation 3 game console outsold by Nintendo's Wii since the two machines were launched late last year.
But Sony's Cyber-shot digital cameras were in strong demand. The electronics and entertainment conglomerate also benefitted from a weaker yen and a firmer stock market, which has boosted earnings at its financial division.
"They didn't have much in the way of new products during the quarter but they seem to have done quite well despite that. Overall, the results leave a good impression" said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Sony, competing with Canon in the digital camera market and Samsung Electronics in the liquid crystal display (LCD) TV industry, earned an operating profit of 99.32 billion yen ($825.6 million) in April-June, up from 27.05 billion a year earlier.
This is a turnaround from an operating loss of 113.4 billion yen in the previous three months, when Sony booked losses at its once high-flying game unit.
But Sony stuck to its operating profit forecast of 440 billion yen for the year to March 2008, up sharply from 71.75 billion a year earlier, when it was hit by hefty costs for launching the PS3 and recalling laptop PC batteries.
The company forecast exceeds a consensus of 423.7 billion yen in a poll of 20 analysts by Reuters Estimates.
In contrast, Nintendo raised its annual operating profit outlook by 37% to 370 billion yen on Wednesday, beating market expectations and closing in on Sony's outlook.
Sony, locked in a three-way battle with Nintendo and Microsoft in the $30 billion video game market, cut the U.S. price of the PS3 by $100 this month to ignite demand.
The new price is still twice as high as the Wii and some industry executives said the price cut is unlikely to drive game console sales substantially.
Sony's Chief Financial Officer Nobuyuki Oneda said the PS3's performance fell short of expectations in the first quarter but expressed hope that a cut to the price of its 60-gigabyte model and the upcoming launch of an 80-gigabyte model would boost demand.
"Thanks to these measures, PS3 sales are picking up pace," Oneda told a news conference.
Sony said it shipped 710,000 units of its PS3 game console in the April-June quarter, less than a fourth of 3.43 million Wii consoles sold by Nintendo in the same period.
Nintendo raised on Wednesday its sales target for the full year to March by 18% to 16.5 million units. Sony said in May it aims to double its PS3 shipments to 11 million units in the same period.
Underscoring sluggish PS3 demand, Nintendo overtook Sony in market capitalisation and elbowed the maker of Vaio personal computers and Bravia LCD TVs off the list of Tokyo's 10 most valuable companies.
Sony's net profit more than doubled to 66.46 billion yen on sales of 1.98 trillion yen, up 13.3%.
Its bottom line was buoyed by the robust performance at Sony Ericsson, the world's fourth-largest mobile phone maker owned by Sony and Sweden's Ericsson.
Ahead of the announcement, shares in Sony closed up 1.11% at 6,350 yen on expectations of strong results, outperforming the Tokyo stock market's electrical machinery index IELEC, which slid 1%.
Sony shares put on 6% in the three months to June 30, while the sub-index rose 8%.