Shares in Japan’s technology giant Sony experienced a considerable decline of 6% in Tokyo trade as the company reported a significant drop in first-quarter profits. The underperformance of its movie and financial divisions contributed to this lackluster performance.
The company’s operating profit witnessed a steep decline of 31%, and executives’ comments regarding the demand for its games and image sensors units raised concerns among investors.
In late 2020, Sony launched the highly anticipated PlayStation 5 console. However, the supply chain disruptions caused by the COVID-19 pandemic severely impacted the availability of units. Although the supply chains have since improved, the company highlighted that sales during the April-June quarter remained below expectations. Sony’s target for the full year is to sell 25 million units.
During the quarter, Sony managed to sell 3.3 million PS5 units. In comparison, Nintendo’s Switch console, which has been on the market for seven years, sold 3.9 million units in the same period. This surge in sales was driven by consumers’ rush to experience the latest installment in the “Zelda” series.
Sony stated that the promotional activities initiated in July have contributed to an improvement in the sales momentum for the PS5. However, industry experts, like Serkan Toto, the founder of Kantan Games consultancy, expressed concerns about Sony’s decision to offer discounts on the PS5 in the West, as it is usually an unfavorable indication. Toto also emphasized the need for Sony to expedite the release of blockbuster first-party games.
“Marvel’s Spider-Man 2” is scheduled for release in October, just ahead of the crucial year-end shopping season. The preceding installment of the game has already sold over 13 million units, contributing to Sony’s success.
In addition to its presence in the gaming industry, Sony is also a leading manufacturer of image sensors utilized in cameras. The company revised its expectations for a gradual recovery in the smartphone market, now forecasting that it will not occur until 2024 at the earliest, due to sluggish demand in major markets. Consequently, Sony adjusted its annual operating profit forecast for the unit, reducing it by 10% to account for the impact of lower sales.
Sony highlighted that the second quarter is being significantly affected by adjustments made by smartphone manufacturers in their procurement processes.
Jefferies analyst Atul Goyal acknowledged that the current financial year will be challenging for the sensors division. Nevertheless, he expressed optimism about higher margins in the subsequent year.
© Thomson Reuters 2023
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