Thursday, October 31, 2013

Sony Posts Loss, Hurt by Box Office Flop

Sony cited the box office flop of the movie “White House Down” as a crucial reason for the weakness in the studio division, which also struggled with an unfavorable comparison against the comparable period a year earlier, when sales were lifted by “The Amazing Spider-Man.”

The problems in Sony’s movie unit contributed to a net loss of 19.3 billion yen, or $197 million, in the most recent quarter, which ended Sept. 30. A year earlier, Sony posted a loss of 15.5 billion yen.

While Sony was expected to post weak results in the most recent period, the company surprised analysts by downgrading its outlook for the full fiscal year, which ends in the spring. The company said it now expected operating earnings of ¥170 billion, down from a previous forecast of ¥230 billion.

Investors have been looking for an increase in sales from the Sony PlayStation 4 game console, which is scheduled to go on sale in the United States and Europe this month.

“This set of results does remind that Sony without the PS4 or Xperia smartphones is still faced with a difficult situation profitwise,” said Damian Thong, an analyst at Macquarie Capital Securities.

In Sony’s fiscal first quarter, which ended June 30, the company surprised investors on the upside, as strong sales of smartphones bolstered its results. The mobile division did well in the most recent quarter, too, showing a sales increase of 39 percent, helped by the weakness of the yen.

But the motion picture division did poorly. The company was also hurt by lower revenue from television licensing and home entertainment businesses.

Sony’s Hollywood division has been the focus of Daniel Loeb, an investor whose hedge fund company, Third Point, owns a 6.5 percent stake in Sony. Mr. Loeb, in a letter to Sony management in May, complained about what he described as lax financial controls at Sony Pictures.

Sony’s board has rejected Mr. Loeb’s proposal for a partial spinoff of the company’s entertainment arm. Sony has scheduled a Sony Entertainment investor day for Nov. 21 at the studio’s headquarters in Culver City, Calif., following up on a commitment to Mr. Loeb by Kazuo Hirai, the Sony chief executive, for more transparency about the unit’s operations.

Before the recent downturn in the entertainment division’s results, investors focused their attention on the electronics business. The weakness in electronics persisted in the most recent quarter, when television sales were weaker than expected. While a weak yen has generally helped Sony, the company said a recent decline in the value of some developing countries’ currencies had, in turn, contributed to the weakness in TVs.

Mr. Hirai has made a turnaround in electronics a priority since he became chief executive last year, with smartphones featuring prominently in his plans. A new model, the Xperia X1, “has caused quite a stir globally,” Yoshinori Hashitani, vice president of investor relations, said in a conference call.

In the most recent quarter, Sony posted overall sales of ¥1.78 trillion, up from ¥1.6 trillion a year earlier, but the results were helped by the weakness of the yen, which increases the value of repatriated earnings from exports. In constant currency terms, sales fell 9 percent from a year earlier, Sony said.

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