Sony operating profit jumps 18% to ¥231 billion

This is despite its gaming business experiencing a 12% dip in operating income.

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(Image: Corinne Reichert/ZDNet)

Sony ended its first quarter for 2018 with an operating profit of ¥231 billion -- a jump of ¥36 billion which equates to an 18% increase year on year.

Sony's net income for Q1 was ¥152 billion, which is a 33% drop from the ¥226 billion it posted at this time last year. The difference is primarily due to Sony reporting a ¥115 billion gain from equity securities in the year prior, compared to the ¥323 million it recorded for this quarter.

Consolidated sales for the conglomerate decreased 1% to around ¥2 trillion, while the company is also set to pay slightly less tax for Q1, only needing to ¥65 billion instead of the ¥75 billion it paid the year prior. 

In reporting its results for the first quarter of FY2019, Sony also said it has realigned various business segments to better "reflect modifications to the organisational structure of certain segments and a change in the senior executives in charge of certain segments". 

Part of that realignment has seen the former Home Entertainment and Sound, Imaging Products and Solutions, and Mobile Communications segments become consolidated into the Electronics Products and Solutions (EP&S) segment. 

Sales for the EP&S unit decreased 15% year on year to ¥484 billion, which the company attributes to a decrease in unit sales of TVs and smartphones.

Operating income for the newly realigned segment decreased ¥7.6 billion year on year to ¥25 billion, due to the decrease in sales and the negative impact of foreign exchange rates, partially offset by a reduction in operating expenses in Mobile Communications.

Under the new umbrella segment, sales for Sony's mobile devices dropped from ¥130 billion to around ¥101 billion year on year, which is a 23% decline. Prior to the organisational reshuffling, Sony's mobile unit has continually experienced losses, with the company's former Mobile Communications unit earning ¥137 billion and suffering an operating loss of ¥15.5 billion in Q3 2018.

Sony's semiconductor segment has been renamed as the Imaging & Sensing Solutions segment. It had a strong quarter, reporting a 14% year on year increase in sales to ¥231 billion. Operating income also increased from ¥29 billion to ¥49.5 billion due to a significant increase in image sensor sales for mobile devices.

The reason for the name change, Sony said, was due to the portion of its semiconductor revenue coming from image sensors have increased every year, and is expected to account for 85% of the segment's revenue in FY2019. 

"Demand for our image sensors continues to be strong and our market share of image sensors for mid range and high-end models of major smartphone makers remains high, due to adoption of multiple sensors per camera and growing demand for high value-added sensors made using large die-sizes," Sony said.

Sony's Game and Network Services segment -- the company's main stream of revenue -- experienced a decrease in its operating income, going from ¥83.5 billion to ¥74 billion year on year. Its sales also dipped slightly, with the company making ¥457.5 billion in sales -- a ¥14.6 billion drop.

Sony's remaining segments -- Music and Pictures -- both had slight increases in sales, from ¥181.5 billion to ¥202 billion and ¥175 billion to ¥186 billion, respectively. Music increased its operating income by ¥6 billion to earn ¥38.2 billion, while Pictures exited the red to make ¥376 million which is the first time the segment has recorded profit in 5 years.

The company said one of its core strategies for growth will be to increase investment in developing artificial intelligence sensors.

Earlier this year, the Japanese tech giant revealed it would go on a hiring spree for engineers that could work in its image sensor research and development. In total, 40% of Sony's new hires over 2019 and 2020 would focus on these areas, it said. 

Sony also plans to invest $5 billion into image sensor production over the next three years to give itself a stronger position in the automotive, IoT, and connectivity industries.

For its results forecast for FY19, Sony anticipates that its consolidated sales will decrease ¥200 billion compared with the previous forecast to ¥8.6 trillion as a result of a reduction in the forecasts for the Game and Network Services and EP&S segments.

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