TOKYO-- Sony Corp. investors have suffered through years of
losses, but the latest massive one, reported Friday, contained a
bit of good news for the Japanese electronics and entertainment
giant.
Booming sales of its PlayStation 4 videogame console and of
camera sensors for smartphones offset weakness in the company's own
mobile division, resulting in a less-than-expected net loss of
Yen136 billion ($1.22 billion) for the summer quarter.
Without a previously announced Yen176 billion write-down of the
value of its struggling mobile business, Sony would have posted a
profit, the company said. As a result, even some Sony executives
were broaching the possibility that Sony might have finally hit
bottom.
"Excluding one-time effects, we have gradually started to make
profits," said Kenichiro Yoshida, Sony's chief financial officer,
at a press conference in Tokyo.
Sales in the videogame business surged 83%, and the division
recorded an operating profit of Yen21.8 billion, reversing a
year-earlier loss. Sony's "devices" unit, which supplies Apple Inc.
and other smartphone makers with image sensors, posted an operating
profit of Yen29.6 billion, about two-and-a-half times the
year-earlier level. Both units raised their full-year revenue
forecasts.
Even Sony's TV unit, which has been losing money for much of the
last decade, logged an operating profit--marking its first
back-to-back quarters in the black since fiscal 2003. Sony has said
it expects the unit to be profitable for the full financial year
ending in March. Sony's overall sales rose 7%, to Yen1.9 trillion
yen, in the quarter.
To be sure, no one is celebrating yet. Over the last decade,
Sony has repeatedly offered hints of a possible turnaround, only to
dash hopes with a renewed slump. The latest worry is the weakness
of the Japanese currency, which plunged against the dollar Friday
after the Bank of Japan surprised the markets with monetary-easing
measures. Mr. Yoshida said every decline of one yen against the
dollar costs Sony Yen3 billion in losses.
Sony also needs to fix the smartphone business, which the
company only a year ago said was a pillar of its turnaround
strategy. Since then the business has been hit by severe
competition from inexpensive Chinese handset markets. The segment
showed an operating loss of Yen172.0 billion in the July-September
quarter, largely due to the charge to write down the business.
On Thursday, Sony named a new head of its mobile division,
Hiroki Totoki, who is seen as a close ally of Mr. Yoshida. The
chief financial officer has stepped up restructuring and
cost-cutting efforts since being named to that post earlier this
year.
Mr. Yoshida said Friday that Sony would scale back its
smartphone business in China, the world's biggest mobile market, by
giving up on sales of low-end handsets that compete with domestic
makers. Mr. Yoshida said the board was considering shrinking in
other emerging countries, but declined to specify.
The decision to reduce its handset offerings in China led Sony
to revise downward its sales target for Xperia smartphones for the
full year ending in March, to 41 million units from 43 million.
That was the second cut to Sony's smartphone forecast this year;
initially the company predicted sales of 50 million smartphones, up
from 39.1 million in the previous fiscal year. Most analysts said
at the time that the projection was unrealistic.
"We had debated whether it would be right to shrink our presence
in the world's largest smartphone market, but have judged what we
need to do right now is to rebuild the business structure," Mr.
Yoshida said.
Analysts say the fortunes of Sony's smartphones now depend on
the U.S. market. They are hopeful that Mr. Totoki, who was a
start-up member of Sony's banking unit, would be able to build
stronger relationships with U.S. mobile carriers, which have
sometimes been reluctant to carry Sony smartphones, and to make the
business more efficient.
"With his experience of setting up and running a bank, I'm
confident Mr. Totoki can establish a relationship of trust with
carriers," said Atsushi Osanai, a former Sony product strategist
who now teaches at Tokyo-based Waseda Business School.
Mr. Totoki said he is proud of the company's smartphones and
wants to turn the mobile division into a star performer once again.
But some Sony watchers are wary, saying more radical measures than
the 15% personnel reduction that Sony has announced for the
division may be necessary.
"We could be told it will cost more and take longer for Sony to
finish the mobile unit restructuring," said Yasuo Nakane, an
analyst for Deutsche Securities.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires