Sony Q1 revenue remains steady due to COVID-19 gaming boom

This is despite the company seeing declines in performance everywhere else.
Written by Campbell Kwan, Contributor

Sony on Tuesday reported operating revenue of ¥1.97 trillion for the quarter ended June 30, a slight increase compared to last year, while operating profit for the quarter remained steady at ¥228 billion despite red ink coming from its electronics businesses.

The increase in operating revenue for the April-June quarter was primarily due to demand for gaming rising during the coronavirus pandemic, which saw gaming sales jump by almost 33% to ¥606 billion along with profit of ¥124 billion.

Sony added that Playstation Plus now has 45 million subscribers as of the end of June, an increase of 6 million compared to December last year.

"Hardware, software, and network services all benefited in the current quarter from the positive impact of stay-at-home demand resulting from the spread of COVID-19," Sony CFO Hiroki Totoki said during the results announcement.

"We aim to continue to enhance and expand user engagement as we approach the launch of PS5 in the 2020 holiday season."

For Sony's other businesses, however, declines in sales and profit were experienced across the board due to COVID-19 impacts. 

In particular, sales for Sony's electronic products and solutions unit, which includes its mobile business, decreased by ¥152 billion year on year to around ¥330 billion for the quarter. This resulted in the business unit suffering an operating loss of ¥9.1 billion.

Sony said mobiles, cameras, and TVs sales decreased significantly due to the closure of retail stores globally, with the impact of COVID-19 continuing to affect markets like Asia and Latin America. 

While its electronics business has suffered due to coronavirus, its mobile phones produced an ¥11 billion operating profit for the quarter due to reductions in operating costs. This is also despite mobile sales decreasing from ¥100.6 billion to around ¥94 billion.

Sony's semiconductor segment also reported a drop in performance, producing ¥206 billion in sales and operating profit of ¥25.4 billion, which are 10% and 50% drops compared to last year, respectively. 

According to the Japanese tech giant, this is primarily attributed to a slowdown in demand for image sensors in the smartphone market. 

"In order to respond quickly to the changes in the environment, especially for image sensors for mobile products, we will modify our strategy, mainly in the areas of investment, research and development, and customer base," Totoki said. 

Its music and pictures businesses also experienced decreases of 13% and 6% in sales, respectively, producing revenue of ¥177 billion and ¥175 billion. Sony said these drops were the result of people consuming less physical media and theatre closures.

Sony also announced on Tuesday that it would establish a facility to repurchase up to ¥100 billion in shares of Sony during the fiscal 2020 year.  

Since the start of 2020, Sony has had to shut down its manufacturing plants in China, Malaysia, and the UK due to the spread of COVID-19. While these factories have since been reopened, the company said these closures impacted its business and supply chain for the quarter and that the coronavirus pandemic would continue to affect its operations for the remainder of the year. 

Last month, Sony acquired a minority interest in Epic Games through a wholly-owned subsidiary of Sony, in an investment deal worth $250 million. 

During the quarter, the company also invested $400 million in Chinese video-sharing company Bilibili and fully acquired its financial services business Sony Financial Holdings, which it previously only had a 65% stake in.

"By eliminating the listed subsidiary relationship between SFH and Sony, we intend to increase the speed of decision making, enhance management optionality, and further improve the value of the business," Totoki said. 

The acquisitions follow Sony announcing in May that it would overhaul its structure and change the company name. The company said effective 1 April 2021, Sony Corporation would be renamed and relaunched as Sony Group Corporation to focus on its role as the headquarters of the Sony Group.

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