Sony Corp warned of a drop in the expected decline in annual profits and lifted some long-term goals as a standstill in its gaming business, as its PlayStation 4 console approached the end of its life begins to hurt.
The gloomy prospect comes after a two-year record profit and highlights the concerns that Sony's loss of steam – which is betting on fun and games for steady revenues after struggling with years of losses with consumer electronics, such as televisions that are more susceptible to price competition .
Analysts greatly expect Sony to launch a next-generation console in 2020 to replace the five-year-old PlayStation 4 (PS4), but business may face tough competition with new video streaming services from Google and Apple to Alphabet Inc.
However, Sony's finance chief has ruled out the threat of cloud-based threats. "With over 90 million users enjoying the platform (PS4), we have a sense of market trends," Hiroki Totoki said at a briefing Friday.
The Japanese company predicts profit for the year to March 2020 to 810 billion yen ($ 7.25 billion), down 9.4 percent from 894.2 billion yen the year before and below an average forecast of 834.49 billion yen 22 analysts surveyed by Refinitiv.
Sony has withdrawn its profit-making earnings for individual businesses for the year to March 2021, including an estimated profit range of 130 billion and 170 billion yen for games, citing "significant changes in the operating environment."
CURRENT PERSPECTIVES OF THE SEGMENT
For the financial year to March 2020, Sony expects the cost of developing the new console to reduce its gaming profits to 280 billion yen from 311 billion yen the year before. PS4 sales are expected to fall by 10% to 16 million units.
The semiconductor business, which includes image sensors, is expected to make a profit of 145 billion yen, a billion yuan from the previous year. Sony's image sensor, centered on its revival, is used by Apple and other major smartphone manufacturers.
Sony remains bullish for the demand for large image sensors and systems with multiple lenses for smartphones, and said it could spend 100 billion RMB more to build a new facility.
However, Sony shares, which lost more than 30 percent of their 11-year highs set last September, have undergone growing concerns about the company's strategy.
Daniel Loeb's hedge fund Third Point LLC is building a stake in Sony to re-commit to changes that involve the tearing down of some businesses, Reuters reported.
The third point is that Sony wants to explore options for some of its business units, including its film studio, which they believe the fund has attracted interest in downloading, according to sources familiar with the issue.
CFO Totoki refused to comment on the report.
However, Jeffries analyst Atul Goyle said in a note last week that "recent reports about the interest of investors and share buyers are likely to cause significant, desirable and persistent pressure on Sony to act."
Sony CEO Kenichiro Yoshida "made some very difficult but desirable decisions" to revive the company when he was the chief of finance, but his decisions after he became CEO "seem a bit benign," the analyst added.
The company needs to get out of the business with a smartphone that loses money, while storing images is a business that has the potential to reverse, added Goyle.