Sony posts $205M profit as downsized mobile business stops bleeding cash

Sony posted a slim ¥21.2 billion ($205 million) profit for its Q1 2016. That’s down on the ¥82.4 billion profit it carded this time last year, but in general the quarter was a mixed bag of positives and negatives following the impact of cost-cutting initiatives.

We already knew the firm would take somewhat of a hit this quarter after it warned of the impact that the Kumamoto earthquake had on its manufacturing operations nearby. Revenue for the three-month period did reflect that, coming in at ¥1.613 trillion ($15.662 billion), down 11 percent annually.

Other factors besides the quake, Sony said, included the strong yen — a factor Nintendo cited in its earnings yesterday — “the deterioration in investment performance” of its Sony Life business, and the downsizing of its smartphone business, which brought in 33 percent less revenue than one year previous.

There’s a positive side to Sony Mobile’s performance, however — it is now at breakeven. Slowing growth and increased competition in the smartphone market had weighed on Sony’s previous financials, with the smartphone business alone responsible for a $544 million loss in the last financial year. So it is quite notable that its mobile communications division posted a very slender ¥400 million ($4 million) operating profit for the quarter.

That, Sony said, was down to tactical withdraws from tougher markets, as well as a shift away from mid-range phones where competition is fiercest toward higher-end devices with better margins. Restructuring also boosted its home entertainment and sound unit, operating income which increased 85 percent annually to ¥20.2 billion ($197 million) despite revenue dropping seven percent over the period.

Amid those changes, Sony’s PlayStation business, which surpassed 40 million consoles sold to date in March, stood tall.

Sony’s games and network unit — which includes PlayStation — was the stellar performer, accounting for the most revenue across the firm and over 75 percent of total Sony profits. It posted an operating profit of ¥44 billion ($427 million), up 126 percent year-on-year, on revenue of ¥330.4 billion ($3.2 billion) for the quarter, up 14.5 percent.

Sony put down that impressive rise to increased PS4 game and console sales, as well as some cost reductions made internally, including lower marketing spend — which makes sense for a console first launch in 2013. Sony is tapping into the rise of VR with PlayStation VR, its $399 take on things, which is due to arrive in mid-October. Given that alternatives like Oculus require a suitable PC rig to work, PlayStation VR could make sense for many who don’t want additional cost or hassle.

As mentioned at the top, many Sony units were impacted by the recent earthquake. Its imaging component business took a 26 percent revenue dip year-on-year, the semiconductor business was down 23 percent, and its component business saw revenue fall 23 percent.

Sony Pictures carded a ¥10.6 billion ($103 million) loss which Sony blamed on currencies, despite some strong box office hits like Angry Birds, and revenue in its music business was up 9 percent year-on-year.