Sony Posts Weak Earnings as PS4 Sales Slow, Film Falters

Kenichiro Yoshida chief executive officer of Sony Corp.

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Sony (TYO: 6758) posted a major decline in profits Tuesday as its games and movie divisions all reported a weak quarter. 

For the last quarter of the year, which included the holiday buying season in the US, Sony reported that profits declined by 48% on year. The company said overall profits came in at $2.10 billion (220 billion Yen), compared with the $3.83 billion it posted for the same quarter last year. Revenues increased slightly to hit $22.5 billion $2.46 trillion Yen) compared with $21.4 billion (2.40 trillion Yen) for last year.

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One of the big laggards within Sony was its gaming division. PlayStation 4 sales were down 25% on-year this holiday season, with 6.1 million consoles shipped for a total of 14.7 million for all of 2019. In comparison, there were 17.7 million consoles shipped in 2018 and 19.4 million in 2017. It’s the weakest holiday quarter for the PS4 since its launch in 2013. All of this wouldn't a surprise to Sony, as it experienced a similar cycle during the last years of the Playstation 3's lifespan.

Over at Sony's film division, a series of box office flops brought down profits substantially, as the division posted a $51 million (6.2 billion Yen) profit for this past quarter, down from $107 million in the year prior.

Sony's imaging and sensor business, which produces the key image processors and lenses for smartphones was a bright spot for the company as smartphone vendors race to build phones with more lenses.  With the success of multi-lensed cameras, sales were up 29% to $2.7 billion and while profit hit $690 million. In late 2019, the company said it was doubling its capital spending to $2.6 billion (JPY 280 billion) in 2019 to keep up with demand.

While the quarter was a weak one for Sony, the company has hiked its profit forecast for year-end (March 31). Sony says that operating income will hit $8.1 billion (880 billion Yen) for the year, while analysts estimate it will post 877 billion Yen. In October, Sony announced it would hit 840 billion Yen in revenue.

According to 13F filings reviewed by Wccftech, institutional investors were expecting a slow quarter. Hedge funds reduced their holdings of the company by 42%, while other institutional investors reduced their holdings by about 1%. Notably, Renaissance Technologies, run by noted quant Jim Simons substantially trimmed its holdings.

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