Sony Says Profit to Quadruple This Year With Room for More

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Kazuo Hirai, leading Sony Corp. on a comeback after years of losses, is giving himself plenty of room to deliver more good news in the future.

The chief executive officer says operating profit will more than quadruple to 320 billion yen ($2.7 billion) this fiscal year. That forecast given Thursday is about 20 percent less than analysts projected as Sony tries to shake its years-long reputation for disappointing investors.

Hirai is cutting costs and focusing on profitability in businesses where Sony has an advantage. That approach, coupled with Chief Financial Officer Kenichiro Yoshida’s emphasis on accountability, has helped boost the stock 103 percent in the past year.

“We have revised our forecasts down 15 times in the past seven years, and that’s not something we want to repeat,” Yoshida said in Tokyo. “The profit forecast takes into account a considerable risk from foreign exchange fluctuations.”

The outlook for the current year includes 35 billion yen in restructuring charges and a negative impact from foreign exchange of 150 billion yen.

Sales will be 7.9 trillion yen this year, Sony said. Net income will reach 140 billion yen, marking the first annual profit in three years. Analysts projected revenue of 8.2 trillion yen and profit of 189.9 billion yen.

‘Minimum’ Targets

“The targets announced are the minimum line, and the point is how much can Sony increase them during the year,” said Yasuaki Kogure, chief investment officer at SBI Asset Management Co. in Tokyo. “Sony will be in trouble if it makes a downward revision as it’s in the process of rebuilding trust.”

Sony fell 0.4 percent to 3,629 yen at the close in Tokyo. The shares have gained 47 percent this year, compared with a 13 percent gain for the benchmark Topix index.

Sony forecast a 17 percent surge in revenue from devices, the unit that makes image sensors, and a 16 percent increase in the pictures division. New releases this year include “Spectre,” the latest installment in the James Bond franchise.

The earnings revival comes after Hirai sold Sony’s personal-computer business, pruned its smartphone lineup and placed the TV manufacturing business into a separate structure to boost performance after years of losses. It also started selling the PlayStation 4 console in China to tap the world’s biggest game market.

TV Profit

The TV making unit had a profit of 8.3 billion yen in the year ended March -- its first in 11 years. The business will post earnings of 5 billion yen in the current year, Sony said.

Hirai forecast in February that operating profit will climb to 500 billion yen in the year ending March 2018. That’s the highest since 1998, when the company featured cathode-ray tube TVs and one of its biggest music sellers was the “Titanic” soundtrack.

Sony forecast a 40 billion-yen operating profit in the games division this year. The PS4 has sold almost twice as many units as Microsoft Corp.’s Xbox One, according to VGChartz, making it the most successful of the latest generation consoles.

The company is strengthening its game streaming service, purchasing the patents of OnLive. PlayStation Now is available in North America for streaming content on Bravia TVs and other Sony devices.

Smartphone Revamp

“The target of operating profit is conservative,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Investors expected too much so Sony is trying to lower their expectations.”

Sony stopped developing new smartphones for China and culled the Xperia lineup as it struggled to compete with Apple Inc., Samsung Electronics Co. and Chinese vendors. The company took a 180 billion-yen charge in the business last fiscal year.

The company is moving its mobile-phone operations from its Tokyo headquarters to save on rent, according to a memo obtained by Bloomberg.

The company boosted investment in semiconductors by 150 billion yen this year to tap surging demand for the sensors that power cameras in Apple and Samsung smartphones. It’s also shifting 220 employees involved in developing and producing chips for gaming consoles to the sensor business and other operations.

Sony said it will restore its dividend and plans to pay out 10 yen per share in the first half of the year. In September, the company scrapped its annual dividend for the first time since listing in 1958.