Sony slips into loss despite pick up in smartphone sales

The company has cut its revenue and profit forecast for its fiscal year

Sony returned to a loss in its second fiscal quarter ended Sept. 30, even as its smartphone business did well.

The Japanese electronics giant has also revised downwards its revenue and net profit outlook for the fiscal year ending March 31, 2014, after revising its annual sales forecasts for certain product lines.

The company's losses widened in the quarter to ¥19.3 billion (US$196 million) from ¥15.5 billion in the same quarter last year. Revenue for the quarter was close to ¥1.8 trillion, a 10.6 percent increase over the same quarter last year. Revenue, however, decreased 9 percent in constant currency, reflecting the volatility of the Yen.

Sony reported in the last quarter a modest profit of ¥3.5 billion which it attributed to improved sales of smartphones and the favorable impact of foreign exchange rates, continuing a turnaround that started in the last fiscal year, when it posted its first profit in many years.

In the quarter ended Sept. 30, the company blamed a drop in the operating profit of its Pictures segment, which saw a decline in motion picture sales. The revenue increase came primarily from higher smartphones sales and the depreciation of the Yen. The sale in September last year of the company's chemical products related business and a drop in sales of video cameras and compact digital cameras affected revenue growth.

Sony's mobile products and communications unit, which sells the smartphones, reported that revenue grew in the quarter by about 39 percent to ¥418.6 billion. The company saw the average selling price of its smartphones increase as it introduced new high-end models like the Xperia Z1.

The company competes in the smartphone market with Samsung Electronics, Apple, LG, Huawei Technologies and Lenovo which have forged ahead of Sony, according to analysts.

Its game sales increased by about 5 percent to ¥155.7 billion, mainly because of favorable exchange rates. The company in fact saw a decrease in the unit sales of its PlayStation 2, PlayStation 3 and PlayStation Portable devices, ahead of the November launch of the PlayStation 4. A cut in the price of the PlayStation Vita also affected the profits of this business.

The company's TV business grew 18.7 percent in the quarter to ¥174 billion.

Sony has revised its revenue outlook for the fiscal year to ¥7.7 trillion from a guidance of ¥7.9 trillion it had made in August. It has also forecast lower profit of ¥30 billion from the ¥50 billion it had earlier forecast. Revenue from semiconductor devices and imaging products like cameras are expected to decrease or be flat in the year, while smartphones and TVs sales are expected to continue to grow.

The PlayStation 4 could bring a dramatic change in the fortunes of its games business. IDC forecast earlier this month that PlayStation 4 bundle sales will overtake Microsoft's Xbox One sales in the upcoming holiday season mainly because of its lower price point.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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