Business / Corporate

Sony records strongest Q2 profit as image sensor demand offsets slide in gaming earnings

Reuters

Sony Corp. on Wednesday said operating profit jumped 16 percent in its strongest-ever result for a second quarter, as robust sales of image sensors offset a tumble in earnings from its gaming division.

The results, which beat estimates, prompted the entertainment and electronics firm to lift its full-year profit outlook although that still fell short of record levels attained last year.

Demand for smartphone image sensors has grown as phone manufacturers introduce multiple-lens camera systems for high-end models — a key differentiator as improvements in other phone functions and features have slowed.

Apple, for instance, added a third lens to the iPhone 11 Pro model, matching the three-camera setup on flagship models for rivals like Samsung Electronics Co. and Huawei Technologies Co.

Sony’s operating income came in at ¥279 billion ($2.6 billion) for the July-September quarter, 19 percent higher than an analyst consensus estimate.

Profits for its sensor division surged 59 percent to ¥76.4 billion, a record for any quarter.

The company also said it had finalized plans to build a new image sensor plant in Nagasaki.

“Originally the plans were laid in response to the huge mobile phone market but going forward image sensors will be in demand in various areas related to the ‘internet of things.’ They also eventually will be used in applications related to autonomous driving,” CFO Hiroki Totoki told a news briefing.

Strength in the sensors gives Sony more leverage in its efforts to argue against a call by Daniel Loeb’s activist hedge fund Third Point for the Japanese firm to spin-off its chips division and concentrate on being an entertainment company. Sony in September rejected the call, saying that the business is “a crucial growth driver.”

Third Point fired back, criticizing Sony for maintaining the status quo “with no concrete proposals to improve the business.”

Gaming profits slid 28 percent to ¥90.6 billion as contributions from big gaming hits last year, such as Marvel’s Spider-Man, waned and sales for its mainstay PlayStation 4 console, now six years old, fell.

Sony also faces harsher competition as Google parent Alphabet Inc. and Apple Inc. have entered the market for game streaming services.

It lifted its annual profit forecast to ¥840 billion from an earlier estimate of ¥810 billion. That was a tad under a consensus estimate of ¥848 billion from 23 analysts polled by Refinitiv and below last year’s record of ¥894 billion.

Sony shares have risen 32 percent since early April, when it was reported that Loeb was building a stake in the company to push for change. The effort marks the second time in six years that Loeb has targeted Sony.

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