​Sony posts 56.2b yen Q1 profit as semiconductor sector 'deteriorates'

Despite posting a Q1 profit, Sony's semiconductor and mobile phone segments -- as well as earthquakes -- are preventing the tech giant from reporting positive figures throughout the business.
Written by Asha Barbaschow, Contributor

Sony Corporation has released its first quarter fiscal results, reporting operating revenue of 56.2 billion yen, a 42 percent decrease from last year's 96.9 billion yen total.

The Japanese conglomerate attributed the majority of its weak quarter one results on the "deterioration of operating results" in the semiconductors segment, which reported a 43.5 billion yen operating loss for the three months to June 30, 2016.

For the first quarter of last financial year, the semiconductors segment posted a 32.7 billion yen profit -- dropping this year by 76.2 billion yen.

This significant decrease in sales was mainly due to lower sales of still and video cameras, Sony said.

Total revenue for Q1 2016 came in at 1,613.2 billion yen, down 10.8 percent year-on-year, with Sony blaming the 194.9 billion yen drop on earthquakes, foreign exchange rates, and the lull in life insurance purchasing.

"The significant decrease was mainly due to the impact of foreign exchange rates," Sony told shareholders. "Decreases in sales in the semiconductors and imaging products & solutions segments [were] due to the impact of the earthquakes in the Kumamoto region in 2016."

Sony said it incurred 13.6 billion yen in expenses as a result of earthquakes.

Additionally, the Mobile Communications segment ended up approximately 400 million yen in the black, giving Sony the segment's first profitable Q1 result since June 2013.

Despite the positive result, Sony said smartphone unit sales were slow.

"This decrease was mainly due to a reduction in mid-range smartphone unit sales, as well as a reduction in smartphone unit sales in unprofitable geographical areas where downsizing measures were implemented during the previous fiscal year, partially offset by an improvement in product mix of smartphones reflecting an increased focus on high value-added models," the company said.

"Profitability improved significantly primarily due to the improvement in product mix, cost reductions mainly resulting from the benefit of restructuring initiatives, and a significant decrease in restructuring charges."

The mobile segment has not returned an annual profit for Sony since the 2012 financial year.

Sony's latest results are the first to break out semiconductors as a separate segment since reshuffling its devices division operating structure earlier this year to establish a new business, Sony Semiconductor Solutions Corporation, and internally reallocating its battery and storage media business responsibilities.

At the time, Sony said the movement of its devices division was one of a series of measures it is currently implementing to strengthen the segment, as it is a key growth driver for the Sony Group.

In 2014, the tech giant closed 20 of its bricks and mortar stores in the US, resulting in approximately 1,000 staff layoffs nationwide, and announced the slashing of 2,100 jobs from its struggling mobile communications segment by March 2016, after it became clear that Sony's mobile unit was in trouble with financial losses.

Previously, there has been talk that Sony may leave the smartphone and TV market as it eyed a forecast profit spike in other areas of its business. Sony's CEO Kazuo Hirai said his company would no longer pursue sales growth in divisions where it has suffered heavy competition, such as smartphones.

Last week, Sony announced it was selling off a portion of its once-groundbreaking battery business to local electronics manufacturer Murata, with the two companies aiming to reach a binding, definitive agreement by October and to complete the transfer by the end of March next year.

The scope of the transfer remains to be finalised, but it's expected to include the battery business conducted by Sony Energy Devices Corporation, Sony's battery-related manufacturing operations in China and Singapore, and assets and personnel assigned to the battery business at the Sony Group's sales and R&D sites.

Earlier this year the conglomerate also offloaded its Sony Creative Software (SCS) product range.

Sony has been on a restructuring rampage, investing in Internet of Things (IoT) chip technology, securing Israeli chipmaker Altair for $212 million in January, and playing with the development of new wearable devices.

Looking forward, Sony expects to post a 300 billion yen profit for this financial year, on revenue of 7,800 billion yen.

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