Sony Declines on Profit Miss, Focus on PlayStation VR Momentum

(Bloomberg) -- Sony Corp. declined to its lowest in two months after the Japanese electronics maker reported second-quarter profit that missed estimates, while investors tried to assess the performance of the company’s new virtual-reality headset.

The shares fell as much as 2.6 percent to their lowest on an intraday basis since Aug. 19. Operating profit, hit by a one-time charge and stronger yen, was 45.7 billion yen ($436 million) in the period ended September. That compares with the 49.7 billion yen average of analysts’ estimates compiled by Bloomberg before the company disclosed a 33 billion yen charge from the sale of its unprofitable battery unit to Murata Manufacturing Co.

Sony is counting on the PlayStation VR, the virtual-reality headset that went on sale last month, to fuel higher revenue for the gaming division. Chief Financial Officer Kenichiro Yoshida said that shipments were on track to hit targets, although the company hasn’t made any forecasts for the device. “We’re moving toward increasing production just a little bit to boost shipments,” he said. The games unit reported operating profit of 19 billion yen on sales of 320 billion yen. Sony shipped 3.9 million PS4 console units in the latest quarter, and maintained its forecast to ship 20 million units in the 12 months through March.

“Their guidance for PSVR shipments didn’t sound particularly strong, so perhaps that didn’t meet expectations which is why we’re seeing some disappointment,” said Hideki Yasuda, an analyst at Ace Research Institute.

Before today, Sony shares had surged 11 percent his year, while the Nikkei 225 Index had declined about 8 percent.

Sony has relied on games this year to make up for losses at its image-sensor division, where earthquakes in April temporarily shut production of chips used in cameras. The higher yen, which reduced income earned abroad, and a price cut for the PlayStation weighed on the division’s results, Sony said in the statement. 

“The focus is on the momentum of the PlayStation,” Damian Thong, an analyst at Macquarie Group Ltd., said before the earnings release. “Image sensors should be back by the December quarter.”

Estimated damage at the image-sensor unit from the earthquakes was revised to 53.5 billion yen, from 80 billion yen. The semiconductors unit had an operating loss of 4.2 billion yen in the second quarter, while sales declined 5 percent to 194 billion yen.

Sony on Monday announced the sale of its battery unit for about 17.5 billion yen and transfer of 8,500 workers, resulting in the impairment on its components business. The affected workers represent 6.8 percent of the 125,300 employees Sony had as of March. The company also cut its profit forecast for the fiscal year by 10 percent to 270 billion yen.

“While the numbers may be below consensus estimates, it actually reflects the impairment from the battery business, so they aren’t that bad at all,” said Kazunori Ito, an analyst at Morningstar Inc.

The company had announced the sale of the battery business in July without disclosing a price, but warned the deal would probably have a negative impact on earnings. The company also cut its net income forecast for the year by 25 percent to 60 billion yen, but maintained that sales will total 7.4 trillion yen.

--With assistance from Pavel Alpeyev To contact the reporters on this story: Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net, Takashi Amano in Tokyo at tamano6@bloomberg.net, Reed Stevenson in Tokyo at rstevenson15@bloomberg.net. To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson