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Sony Reports First Annual Profit Since 2008 Sony Reports First Annual Profit Since 2008
(about 5 hours later)
TOKYO — Sony said Thursday it had eked out an annual profit for the first time in five years, thanks to belt-tightening and a wave of good fortune for exporters brought about by the weakening yen, but the company’s future continued to hinge on turning around its ailing electronics business. TOKYO — Sony said Thursday that it had eked out an annual profit for the first time in five years, thanks to belt-tightening and a wave of good fortune for exporters brought about by the weakening yen, but the company’s future continued to hinge on turning around its unprofitable electronics business.
The Tokyo-based electronics and entertainment giant said Thursday it had booked a net profit of ¥43.0 billion, or $458 million, in the financial year through March, compared with a loss of ¥456.7 billion a year earlier, making 2012 its first full year in the black since 2008. The Tokyo-based electronics and entertainment giant said that it had booked a net profit of ¥43 billion, or $435 million at the current exchange rate, in the financial year that ended in March, compared with a loss of ¥456.7 billion a year earlier, making 2012 its first profitable full year since 2008. Sales grew 4.7 percent to ¥6.8 trillion.
Sales for the fiscal year grew 4.7 percent to ¥6.8 trillion, it said. Sony said it expected net profit to increase a further 16 percent in the current financial year, which ends next March, to ¥50 billion. It projected that sales would rise 10 percent this year to ¥7.5 trillion as the company gears up to release a new video game console, the PlayStation 4, during the holiday season, and bolsters its smartphone offerings.
For the January-March quarter, Sony said net profit came to ¥93.9 billion, compared with a net loss of ¥255.2 billion in the same quarter the previous year. Sony said it expected profit to grow a further 16 percent in the current fiscal year, which ends in March 2014, to ¥50 billion. The effect of a weaker yen was especially pronounced in the January-to-March quarter, for which Sony said net profit had come to ¥93.9 billion, compared with a net loss of ¥255.2 billion in the same quarter the previous year.
To climb back to profit, Sony has done much streamlining, dissolving flat-panel television manufacturing ventures with Sharp and Samsung, shedding its chemical-products business and selling off its office buildings, including its New York headquarters on Madison Avenue for $1.1 billion. Meanwhile, the effect of consolidating sales from Sony’s former mobile venture with Ericsson of Sweden, as well as higher revenue from its financial services unit, contributed significantly to full-year profits.
A dramatic fall in the value of the yen, prompted by the economic policies of Prime Minister Shinzo Abe, is also helping Sony buttress its bottom line by increasing the value of its overseas earnings. “We set out this year with the aim of doing everything we can to get back in the black,” Masaru Kato, Sony’s chief financial officer, said in a conference call with analysts in Tokyo. “This year, we absolutely intend to make a profit in electronics.”
Now, Kazuo Hirai, who took over as chief executive in April 2102, faces the uphill task of reviving Sony’s storied electronics division. Once a consumer electronics powerhouse, Sony has in recent years been outshone by the likes of the design-savvy Apple, and outgunned by the marketing and manufacturing prowess of Asian rivals like Samsung. Sony has indeed done much streamlining to claw its way back to profit, dissolving flat-panel television manufacturing ventures with Sharp and Samsung, shedding its chemical product business and selling off its office buildings, including its New York headquarters for $1.1 billion.
But there are early signs of revival. After disentangling itself from an unproductive smartphone venture with Sweden’s Ericsson, Sony has scored a series of hits, including its snazzy Xperia Z smartphone, which went on sale in February to mostly rave reviews. Sony is also counting on the release of its next-generation video game console, the PlayStation 4, to spur holiday-season sales. And the company is still seeking to exploit the relationships between its hardware business and its vast catalog of games, music and films. A dramatic decline in the value of the yen in the second half of the financial year, prompted by the economic policies of Prime Minister Shinzo Abe of Japan, is also helping Sony buttress its bottom line by increasing the value of its overseas earnings. Sony said, however, that as its business became more global and the company incurred more of its costs in dollars, currency fluctuations would have less of an effect.
For now, investors are bullish on Sony’s prospects. Sony’s share price has doubled in the past six months, though it ended trading Thursday down 1.36 percent at ¥1,744, as investors locked in profits before the earnings release. Still, its shares remain valued at less than a third of the heights seen five years ago, underscoring just how far Sony has fallen, as well as the upside it now hopes to regain. Kazuo Hirai, who took over as chief executive in April 2012, is attempting to revive Sony’s electronics division, which continues to lose money. Last week, Sony announced that dozens of top executives had agreed to forgo bonuses to take responsibility for the continued red ink in the electronics business.
Mr. Hirai faces an uphill battle. Once a consumer electronics powerhouse, Sony has in recent years been outshone by the likes of the design-savvy Apple and outgunned by the marketing and manufacturing prowess of Asian rivals like Samsung.
Even as Sony booked an annual profit, its television business lost money for the eighth straight year, with sales slumping 30 percent from a year earlier. But its losses have been narrowing as Sony has outsourced its panel-making, falling by ¥137.9 billion from a year earlier to ¥69.9 billion, and Sony expects to finally break even in televisions this financial year.
Sony also struggled in its digital camera and video business, hurt by a shrinking market for compact cameras and camcorders as more users opted to snap pictures and take video with their smartphones. However, Sony has found some success with higher-end cameras with interchangeable lenses for photography buffs.
And the Xperia Z smartphone, which went on sale in February, has garnered mostly rave reviews. Sony said sales in its mobile device segment grew by 18 percent, buoyed both by higher unit sales and a shift toward higher-priced smartphones.
The Xperia Z, said Mr. Kato, the chief financial officer, embodied the still-present technological pizzazz of Sony’s engineers. “This is what happens when we pack a gadget full of Sony technology,” he said.
Profits in the gaming division were lower last year after the disappointing performance of its PlayStation Vita handheld machine, which made its debut in late 2011. Sony slashed the device’s price this year.
Sales in Sony’s film business grew 11 percent, thanks to blockbusters like the James Bond movie “Skyfall” and “The Amazing Spider-Man.” The sluggish market for packaged music continued to weigh on the music division, though hits like “Take Me Home” and “Up All Night” from the boy band sensation One Direction helped stave off a sales decline.
Sony is still seeking to exploit the relationships between its hardware business and its vast catalog of music and films. Though its entertainment business has generated healthy profits, the company has yet to deliver on its long-promised strategy of leveraging that material to sell more electronics — for example, by offering exclusive content on Sony gadgets.
For now, investors are bullish on Sony’s prospects. The company’s share price has doubled in the past six months, though it closed Thursday down 1.4 percent at ¥1,744, as investors locked in profits before the earnings release. Still, its shares remain valued at less than a third of the heights seen five years ago, underscoring just how far Sony has fallen, as well as the upside it now hopes to regain.