Strong Smartphone Sales Help Sony Recovery as Loeb Seeks Entertainment Spin-Off

Japanese electronics major Sony returned to profitability in its fiscal first quarter ended in June, helped by a weak yen and better sales of its Xperia range of smartphones.

For the first quarter ended on 30 June, the company made a net profit of 3.5bn yen ($35m; £23m), compared to a loss of 24.6bn yen last year.

Total sales and operating revenue rose 13% year-on-year to 1.71tn yen, primarily due to favourable foreign exchange rates, better financial services revenue and an increase in unit sales of smartphones.

The yen has dipped nearly 25% against the US dollar since November 2012. Excluding the impact of foreign exchange rates, sales fell 3% year-on-year.

Surging Mobile Sales

By segment, Mobile Products and Communications recorded a 36.2% increase in revenue to 389bn yen as the company witnessed more unit sales and better average selling price for smartphones.

Sony has launched new models in a bid to boost its share of the fast-growing global smartphone market dominated by Samsung and Apple. Last month, the company launched the Xperia Z Ultra, a 6.4in screen handset, which the company claims as the slimmest large-screened device on the market.

That was after the success of the company's Xperia Z waterproof smartphone, running on Google's Android operating system.

Other Segments

In addition, sales increased 9.3% in home entertainment division, 3.6% in pictures division, 13.3% in music division and 29.9% in financial services division.

Meanwhile, imaging products and solutions recorded a 10.4% decline in revenues to 173.6bn yen, as unit sales of video cameras and compact digital cameras continued to fall in line with the general contraction in the markets.

Revenues from Sony's gaming division was flat on a reported basis, but fell 15% on a constant currency basis at 117.9bn yen. The company noted that the sales of gaming consoles PlayStation 3, PlayStation 2 and PSP declined compared to last year.

Outlook

For the fiscal year ending in March 2014, the company expects to record 50bn yen in net income, up 16.2% from last year, given foreign exchange rates of about 100 yen per US dollar and 130 yen per euro. Sales are projected to increase 16.2% from the previous year to 7.9tn yen.

The better result for the first quarter is unlikely to appease activist shareholder Daniel Loeb, whose New York-based Third Point hedge fund wants Sony to spin off the group's money-making entertainment arm that comprises of the movies, TV and music businesses.

Sony's board is expected to reject Loeb's proposals, the Nikkei newspaper said. The company directors are of the view that the electronics company could do better amid intense competition by maintaining its ties with the entertainment arm.