Photographer: Noriko Hayashi/Bloomberg

Sony Hikes Sales, Margin Goals for Games Ahead of VR Launch

  • Games and networks services remain the biggest growth drivers
  • VR will go beyond games and draw from enterainment portfolio

Sony Corp. expects the profitability of its games division to rise as the Japanese company prepares to launch a virtual-reality headset to complement its PlayStation and streaming services.

The company is targeting an operating profit margin of 8 to 10 percent for its games and network services division in the year ending March 2018, up from 5 to 6 percent previously. It raised its target for revenue at that unit to between 1.8 trillion yen ($17.6 billion) and 1.9 trillion yen, up from 1.4 trillion yen to 1.6 trillion yen previously.

Since taking the helm four years ago, Kazuo Hirai has led Sony through a painful shift away from consumer electronics, cutting thousands of jobs and selling the company’s Vaio personal computer brand. The focus on games, movies and network services has boosted profitability. Reflecting changing priorities, the company on Wednesday cut its forecasts for sales and operating profit margin target at the mobile division.

“Games and network services are the biggest growth drivers in our mid-term plan,” Hirai told reporters in Tokyo. “Beyond just games, VR offers an opportunity to make full use of multiple Sony technologies, such as cameras and shooting, content production capabilities and entertainment assets.”

Sony’s film arm encompasses Columbia Pictures and is home to such major Hollywood franchises as Spider-Man and TV classics including Breaking Bad.

On Wednesday, Hirai reaffirmed Sony’s overall targets for operating profit of at least 500 billion yen in the year ending March 2018. The chief executive also said his company’s working on a robot capable of forming emotional bonds with people, and will start a corporate venture capital fund next month to seek out promising technology.

Sony’s now looking to cement its lead over Microsoft Corp.’s Xbox One and Nintendo Co.’s Wii U consoles by launching a virtual-reality headset in 2016. The $399 PlayStation VR will be available to the more than 36 million people who already own a PS4 when it goes on sale in October. The device may help convert more PS4 owners into video-game subscribers who then pay monthly fees, said Jitendra Waral, a Bloomberg Intelligence analyst. Sony had forecast sales of its PS4 consoles will climb 13 percent this fiscal year to 20 million units.

The company has forecast profit at its games and network services business will rise 52 percent to 135 billion yen this fiscal year. Subscribers to its PlayStation Vue web-TV service have exceeded 100,000 since its March 2015 debut, people with knowledge of the matter have said.

But Sony slashed its target for mobile unit sales to 900 billion yen to 1.05 trillion yen, from 1 trillion yen to 1.25 trillion yen before. The industry is facing its worst year since Apple Inc. introduced the iPhone in 2007. While much of the drop in demand is expected in mature markets and China where Sony no longer develops phones, the broader slowdown may hurt its image-sensor business, which supplies camera components for phones.

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