Sony Corp. (SNE) posted a poor March Quarter, as its stock and convertible bond holdings got slammed. Sony suffered an operating loss of 4.7 billion yen ($45 million), far short of an expected profit exceeding 27 billion yen.
For the fiscal year ending March 31, Sony reported a profit of 369.4 billion yen (US$3.5 billion yen; euro2.3 billion), beating expectations and setting a new record for Sony. It was almost three times the 126 billion yen profit earned last fiscal year.
SNE’s profitability in its core electronics sector improved for the fiscal year. While sales in its movies unit declined 11%. The drop was attributed to less movies being released than the previous year.
However, the real news is Sony’s high expectations for the coming year. SNE expects operating income to rise 20% to $450 billion yen, bolstered by a surprisingly large profit in games. The forecast is 13% higher than analyst estimates. Reduction in the cost of making PlayStation 3s and resilient sales versus the Nintendo Wii are the main drivers for the turnaround from the $3.4 billion loss from the PS3 division in the past two years.
In the face of a strong yen, rising raw material costs and signs of a continuing (and perhaps prolonged) global economic slowdown, Sony’s positive forecast is welcome news for Wall Street bulls. With Sony having such a large concentration of sales in the US, a big factor in these projected numbers is currency risk. The forecast includes a 100 yen to dollar exchange rate (the current rate is closer to 105 yen to 1 dollar). If you’re bullish on the dollar, Sony, like many Japanse electronics makers, should look even rosier.
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