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News18 » Tech
2-min read

Multi-Camera Smartphones Single-Handedly Help Sony Post Record Q1 FY20 Profits

Sony's imaging sensors business helped Sony comfortably make up for the slow performance in the gaming segment to post record profits for Q1 FY20.

Reuters

Updated:July 30, 2019, 10:17 PM IST
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Multi-Camera Smartphones Single-Handedly Help Sony Post Record Q1 FY20 Profits
Sony's mobile image sensors. (Photo: Reuters)
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Japan’s Sony Corp surprised the market by reporting on Tuesday a record first-quarter operating profit despite the slowing gaming business, as strong demand for multiple-lens camera systems for smartphones boosted sales of image sensors. Sony is benefitting from sales of more powerful smartphones at customers including Huawei Technologies, offsetting gaming weakness as its almost six-year old PlayStation 4 console nears the end of its life and the cost to develop a next-generation console rises.

“Our image sensor sales have been growing independently of the smartphone market growth” thanks to smartphone makers’ adoption of multiple-lens cameras and large-size image sensors, Chief Financial Officer Hiroki Totoki told an earnings briefing. “Our production facilities have been operating at full capacity.” The electronics firm posted an operating profit of 230.93 billion yen ($2.1 billion) for the April-June quarter, up 18.4% from a year earlier and overshooting a consensus estimate of 173.61 billion yen from eight analysts compiled by Refinitiv.

The company, which has had two straight years of record profits, maintained its profit forecast for the year ending March at 810 billion yen. The imaging and sensing business, which includes image sensors, posted a profit of 49.5 billion yen, up from 29.1 billion yen a year earlier, comfortably offsetting a 9.6 billion drop in profit at the gaming business, its biggest profit earner. But some analysts say Sony is likely to be susceptible to the situation at Huawei, a major image senor client which Washington placed on a blacklist in mid-May, even though the Chinese company said smartphone shipments rose 24% in the first half of the year.

Jefferies estimates Huawei accounted for 15%-20% of Sony’s image sensor revenue for the previous year. “Concerns about trade-related issues remain for the second half (of the financial year),” Totoki said at the briefing, adding that Sony will closely monitor the situation during the July-September quarter to judge the impact on annual earnings. Daniel Loeb’s activist hedge fund Third Point LLC has called on Sony to spin off the imaging and sensing business and position itself as an entertainment company.

Totoki said the company is always open to proposals from shareholders, but also reiterated that the image sensor business was one of the pillars in the company’s growth strategy. He added that the annual profit forecasts have not factored in a potential fourth tranche of tariffs on $300 billion worth of goods that Washington has held off launching, a measure that would see almost all Chinese imports to the United States impacted by tariffs.

The fourth tranche, if implemented, would affect its gaming consoles, cameras, audio devices and projects, he said. Sony shares closed almost flat on Tuesday before the results were released, while the broader market .N225 climbed 0.4%. The stock hit 11-year highs in September but has been battered this year by worries that profit at the gaming business has peaked.

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