Sony chief gives cautious outlook

Bloomberg

Sony Corp said its operating profit will likely fall this year and pulled its financial forecasts for most divisions because of substantial uncertainty in their operations.
Operating profit will be 810 billion yen ($7.3 billion) in the year ending in March 2020, down from last year’s 894 billion yen and below the
843 billion yen average of analyst estimates compiled by Bloomberg. For the three months ended in March, operating income came to 82.7 billion yen, surpassing the 69.1 billion yen average projection.
Sony Chief Executive Officer Kenichiro Yoshida is known for providing conservative guidance, a practice he honed helping to lead the Japanese icon through a turnaround over the past five years. Still, he now needs to balance that caution with confidence to guard against activist investors like Daniel Loeb, who is once again circling the company. Sony vowed deep cuts in its troubled mobile division to help pay for the rising costs of developing a successor to its PlayStation 4 game console.
“We just need to see some stability,” said Freddie Lait, chief investment officer at Latitude Investment Management in London, which owns Sony shares. “If they can just demonstrate that earnings aren’t going to fall off a cliff, and they’re going to stabilise roughly here, the re-rating for the next three years could be very positive for the stock.”
Sony’s US-listed shares climbed almost 8 percent after the results. The stock had fallen 2.1 percent this year prior to the results, compared with a 8.3 percent rise in the benchmark Topix. Japan is heading into a prolonged holiday, with trading in Tokyo restarting on May 7.
In a surprising move, the company pulled medium-term profit targets for electronics and entertainment that it had set less than a year ago. Chief Financial Officer Hiroki Totoki later told journalists that a major acquisition in music, big growth in game software sales, and losses in mobile made it difficult to predict future profits with enough certainty.
“Taking all of this, we thought that perhaps it would be a bit misleading to discuss only the 2020 fiscal year,” said Totoki. “For us, it is more meaningful to focus on the cumulative total.”
The company’s phone business, called Xperia, recorded a 41.1 billion yen loss in the latest quarter.
But Totoki said after the results the unit will speed up cost-cutting by shuttering production in Beijing and withdrawing from markets including South America.
Sony last month announced it will merge the Xperia unit with its other electronics businesses — cameras, TVs and audio.