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Sony’s hard slog paying off

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Sony yesterday reported one of its best quarterly profits in the last eight years, swinging from a material loss in the year ago period. Sony’s fiscal year begins in April and for the July-September quarter the company reported an operating profit of ¥88 billion, or around $729 million. This represented a big swing from an operating loss of 85.6 billion in the year ago period when it took a big impairment charge for its smartphone business. Sony’s operating profit came in a smidgen above the average estimate of analysts surveyed by Thomson Reuters.

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It was a similar story at the net income line, with Sony moving from a loss of ¥136 billion in the July-September 2014 period to a profit of ¥33.6 billion for the recent quarter. It was the company’s fourth consecutive profit beat and this should bolster confidence that the company’s turnaround has some legs this time.

There were a number of positives in the result, although the company still has some work to do, as while Sony’s Mobile Communications (smartphone) segment pared its losses significantly, it remained in the red. We believe this segment is on a deadline and if its not profitable over the next year its likely to be up for sale.

Positively strong PlayStation and image sensors continued to trend well, with the Games & Networks Services segments operating profit up almost 10% and the Devices segment (which houses image sensors) operating profit up almost 16% year on year.

We note too that the results were released just a day after it was confirmed that Sony was buying Toshiba’s sensor business. As we have discussed in prior Daily’s, Sony has the dominant position in image sensors for smartphones and this area along with the gaming division are focus areas for future growth.

Sony’s normally solid Pictures (movies) segment had a weak quarter and has had a weak calendar 2015 to date, but the latest James Bond instalment, Spectre should provide a turbo-boost this quarter. The movie has won good reviews and is breaking records at the UK box office. The movie is slated for wider release beginning November 6.

Overall though we are happy with the overall result and Sony’s has maintained its outlook for an operating profit of 320 billion in the fiscal year ending March 2016. CEO Kazuo Hirai has made some tough decisions since taking over the top role at the beleaguered consumer electronics company, but it slowly seems to be getting some of its financial mojo back.

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