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Sony greenlights 2nd stock buyback this year, totaling $2.7bn

Repurchases seen as attempt to bolster slumping share price

Sony turned around its electronics segment, including televisions, but that has not been enough to convince investors the company is on a pathway to growth.   © Reuters

TOKYO -- Sony said Thursday it will buy back up to 200 billion yen ($1.82 billion) worth of shares, a little over three months after its historic 100 billion yen stock repurchase announced in February, which was the company's first ever aimed at boosting shareholder returns.

The Japanese electronics conglomerate is further rewarding investors after securing record operating profit for two consecutive years. The quick succession of buybacks seems to be targeted at propping up its underperforming share price.

Sony enabled the purchase a maximum of 60 million shares, representing 4.8% of shares in circulation excluding treasury stock, between Friday and the end of March 2020.

The company said it is setting the parameters for this second round of buybacks so that it can "flexibly repurchase its own shares in consideration of factors such as opportunities for strategic investment, Sony's financial condition and the price of its common stock."

Sony's stock price has plummeted more than 20% from its 6,973 yen peak last September, performing far worse than the Nikkei Stock Average, which fell about 10% over the same period.

"The company is sending a message that it is expecting a higher share price," said Tomoichiro Kubota, an analyst at Matsui Securities.

Investors have shied away from the company because of its dim growth prospects. Sony's PlayStation 4 is approaching its six-year anniversary since its launch in November 2013, and demand is reflecting its age. For the current fiscal year ending next March, unit sales are projected to be 20% below fiscal 2016's peak.

Sony's semiconductor business, meanwhile, is exposed to a slowing smartphone market, while the movie segment faces stiff competition.

The company's operating profit is forecast to shrink 9% this financial year, while the bottom line looks to contract by 45%. Return on equity is expected to drop to 13% from 27%, due in part to higher corporate taxes.

On the other hand, Sony is sitting on a growing pile of cash. Excluding the financial services business, total cash equivalents amounted to roughly 960 billion yen at the end of March, a 270 billion yen increase over two years, thanks largely to improved profitability in the electronics segment combined with steady earnings in gaming and entertainment.

But that cash hoard has drawn criticism from some quarters. "What they will do with the accumulated cash is one business challenge," said a source at an international institutional investor.

The two rounds of stock buybacks in the span of a few months puts into sharp relief a company that has grown self-conscious of its capital efficiency, while struggling to find its next growth business. From the perspective of the market, Sony appears to be transitioning from a growth stock to a value stock, looking to attract new investors with perks.

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