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Media & Entertainment

Sony raises full-year forecast as gaming thrives under COVID

Japanese conglomerate expects net profit to grow 37% to $7.6bn

Sony Executive Deputy President and Chief Financial Officer Hiroki Totoki speaks at an online press conference on Oct. 28. (Screenshot from Sony's website) 

Key points from Sony's results

  • Gaming sales up 22% in first six months
  • Net profit doubles during first half of fiscal year
  • US crackdown on Huawei puts image sensor business under pressure
  • Hope of strong debut for PlayStation 5 console next month

TOKYO -- Sony said it expects full-year net profit to grow 37% after a strong second quarter, improving from its previous forecast of a slight decline, as pandemic-related demand boosted gaming revenue.

On Wednesday, the Japanese conglomerate said it now expects net profit to increase to 800 billion yen ($7.6 billion) for the fiscal year through March 2021, supported by a 3% jump in revenue to 8.5 trillion yen. Sony had previously forecast that revenue would increase just 0.5% to 8.3 trillion yen and that net profit would decline 12% to 510 billion yen.

The revision was driven by the strong performance of its gaming business in the first half, which helped to offset the significant slowdown in its image sensor business, a key segment for the company.

Gaming has been one of the segments few to benefit during the COVID-19 outbreak as more people choose to spend time playing games at home instead of going out.

Sony's subscription-based gaming services have performed particularly well. PlayStation Plus subscriptions, which give users access to online multiplayer games for a monthly fee, reached 45.9 million users as of September, an increase of 24% compared to the same period a year ago. Sony also expects software sales, including popular game titles like "Ghost of Tsushima," to continue to grow as a result of pandemic-driven demand.

The company is also gearing up for the release of its next-generation gaming console, the PlayStation 5, on Nov. 12. Although the company warned that marketing costs and other related expenses will mean the PS5 itself will likely not make a profit this fiscal year, Sony has expressed hopes for a strong debut for the console.

"We aim to sell more than 7.6 million units by the end of this fiscal year and surpass PS4's shipments in its first year," Sony Chief Financial Officer Hiroki Totoki said at the earnings conference on Wednesday.

A decrease in tax expenses, as well as gains on already-owned shares, also helped boost the full-year outlook.

Meanwhile, sales of Sony's high-end image sensors continued to struggle amid a slowdown in the smartphone market caused by lockdowns and economic uncertainty in numerous countries. Sony is the world's leading producer of image sensors, with a global market share of 50% as of last year. However, the company cut its forecast for the business and now expects operating profit to decline 65% this year to 81 billion yen.

The U.S. crackdown on China's Huawei Technologies, one of the world's top makers of smartphones, has also affected Sony. The Chinese smartphone maker is estimated to account for about a fifth of Sony's image sensor sales, making it the second-biggest customer after Apple.

While Sony is known for developing pricier, high-quality sensors, CFO Totoki said that to meet current market demand, the company will "focus on expanding our image sensor share mainly for general-purpose products this year."

Aside from its sensor business, Sony said profit at its movie and electronics segments is also expected to fall this year. The coronavirus has delayed the production of films, and many theaters in the U.S. remain closed. Meanwhile, Sony expects a decline in digital camera sales as well as products for broadcast and professional use.

For the April-September period, Sony reported a 103% increase in net profit to 692 billion yen, while revenue rose 0.9% to 4 trillion yen. Gaming sales increased 22% to 1.1 trillion yen during the six months, a trend Totoki expects to continue.

"We believe that this momentum, supported by demand from stay-at-home players will continue to be strong," the CFO said.

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