Sony expects ¥1 trillion in annual operating income from COVID-19 gaming boom

Gaming, anime, and music-streaming were collectively a boon for the company over the past year.
Written by Campbell Kwan, Contributor

Sony on Wednesday announced it has revised its outlook for the 2020 fiscal year, raising its net profit forecast from ¥800 billion to ¥1.085 trillion.

If the forecast is accurate, Sony's net profit will have increased by 86% compared to the previous fiscal year.

Other revisions made to the company's 2020 outlook include consolidated sales and operating income now being expected to rise to ¥8.8 trillion and ¥940 billion, respectively, which are 4% and 34% jumps from the previous forecast.

According to Sony, the revisions were made to reflect the company's strong performances in the areas of gaming, music-streaming, and anime during the pandemic.

Posted as part of Sony's third-quarter results, the company revealed that over 4.5 million units of the PlayStation 5 (PS5) have been sold as of the end of December. Sony added that it is currently on track to meet its sales goal of selling more than 7.6 million units for the fiscal year.

During the quarter, when the PS5 started selling, the company's gaming business provided ¥883.2 billion in sales -- a 40% improvement when compared to the same period last year.

Operating income for the gaming business increased by ¥26.7 billion year-on-year to ¥80.2 billion due to an increase in sales from game software and network services. This was partially offset, however, by increased costs associated with the launch of the PS5 and losses recorded on PS5 hardware resulting from strategic price points.

Sony's electronic products and solutions unit, meanwhile, continued to hum along with its sales remaining flat at ¥649 billion and operating income increasing ¥25.4 billion year-on-year to ¥105.8 billion for the quarter.

The operating environment improved somewhat during the quarter, Sony said, as stay-at-home demand for TVs continued and demand for digital cameras and other products recovered.

Its music and pictures businesses also experienced increases of 64% and 400% in operating income, respectively, producing figures of ¥59.7 billion and ¥22 billion. Sony said these improvements were the result of various music artists and anime productions being successful.

In December, Sony acquired Crunchyroll, a US anime streaming service that currently has over 90 million registered users and 3 million paying subscribers.

The only Sony business line that saw both sales and profits decline during the quarter, when compared to the same period last year, was its semiconductor segment.

During the quarter, the Imaging & Sensing Solutions business provided ¥267 billion and ¥50.4 billion in sales and profits, respectively, which were drops of around 10% and 33%. According to Sony, this was primarily due to lower sales of image sensors for mobile and an increase in research and development expenses and depreciation.

Despite reporting a poorer year-on-year performance, Sony still improved its outlook for its image sensor business to reflect better-than-expected sales as it was able to resume shipping to Huawei.

Last year, Sony expressed concern over a slowdown in the business due to the US crackdown on Huawei.

"As a result of the resumption of shipments, we reversed ¥8.5 billion of the approximately ¥17.5 billion write down of finished goods and work-in-progress inventory for the customer that we recorded at the end of the previous quarter," Sony said.

Lenovo also reported its third-quarter revenue and net profit increased by 22% and 53%, respectively, to $17.3 billion and $395 million, both of which are new highs for the company.

"The delivery of yet another record-breaking quarter is a reflection of our innovative product portfolio and operational excellence, which drove growth across all businesses," Lenovo CEO and chairman Yuanqing Yang said.

The jump in net profit was largely attributed to Lenovo's Intelligent Devices Group (IDG) recording a pre-tax profit of $935 million, up 36% year-on-year.

The PC and Smart Devices group, one of the two business units within the IDG group, provided the bulk of IDG's pre-tax profit by way of almost $925 million for the quarter, which was a 35% year-on-year uptick. The increased pre-tax profit came off the back of the group growing its revenue by 27% year-on-year to around $14 billion.

IDG's second business unit, Mobile Business Group (MBG), while not performing as strongly, still reported pre-tax profit of $10 million, which was an improvement of $7 million year-on-year. During the quarter, it reported revenue of $1.5 billion, an increase of 10%.

Meanwhile, Lenovo's data centre business saw its revenue increase by 2% year-on-year to $1.6 billion, which accounted for 9% of Lenovo's total sales. According to Lenovo, this was the data centre business' strongest performance ever, which it said was largely thanks to strong cloud demand and ongoing client diversification.

During the quarter, Lenovo also created a new group, called Solutions and Services Group (SSG), which will focus on smart verticals and services.

Lenovo also said that despite uncertainties since the pandemic, the company expects to continue to both see earnings growth and expand its business transformation as regional economies, including China, are now seeing rebounds in certain areas of enterprise spending.

During CES2021, Lenovo launched a new detachable ThinkPad device, the X12 Detachable, which was the company's first detachable device released in a few years.

The company also unveiled the ThinkReality A3, a new pair of smart glasses, that are aimed at "transforming work across all levels" through virtual displays, 3D visualisation. 

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