BENGALURU: Good performances to the extent of double digit percentage revenue growth by Sony Corporation’s (Sony) Games & Network Services (G&NS) and Music segments helped mitigate the lacklustre and poor performance by the company’s Mobile Communications (MC) and more specifically its Financial Services segments. ‘All Other’ segment reported almost flat revenue growth. Sony’s other segments – Imaging Products & Solutions (IPS&), Pictures, Devices, segments reported almost flat to growth in single digit percentage terms. The company’s Home Entertainment & Sound (HES) segment and reported a slight decrease in revenue, but a growth in operating income. On a constant currency basis, Sony’s sales decreased 7 per cent YoY.
Sony reported almost flat sales and operating revenue (decline of 0.5 per cent) in Q2-2016 (Quarter ended September 30, 2014, current quarter, second quarter of 2015) at Ą1892.7 billion as compared to the Ą1901.5 billion in Q2-2015. The company reported net income attributable to Sony shareholders of Ą33.6 billion in Q2-2016 as compared to a loss of Ą136 billion in the corresponding year ago quarter.
Sony says that sales were essentially flat YoY mainly due to a decrease in Financial Services segment revenue, reflecting a deterioration in investment performance in the separate account, and a decrease in MC segment sales, reflecting a significant decrease in smartphone unit sales, substantially offset by the impact of foreign exchange rates and a significant increase in G&NS segment sales, reflecting an increase in PS4 software sales.
Segment Performance
Mobile Communications
Sony’s MC segment reported a 15.2 per cent decline in sales to Ą279.2 billion in the current quarter as compared to the Ą329.5 billion in Q2-2015, which Sony says was due to a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability.
Consequently the segment reported a lower operating loss of Ą20.6 billion in Q2-2016 as compared to Ą170.6 billion in Q2-2015. Sony says that this decrease in operating loss was primarily due to a Ą176.0 billion impairment charge of goodwill recorded in the same quarter of the previous fiscal year. The operating results were also primarily affected by the negative impact of the appreciation of the US dollar, reflecting the high ratio of US dollar-denominated costs, and an increase in restructuring charges. The negative impact of the above-mentioned decrease in smartphone unit sales was offset by an improvement in product mix reflecting a shift to high value-added models, as well as reductions in costs including marketing and research and development expenses. During the current quarter there was a Ą24.4 billion negative impact from foreign exchange rate fluctuations.
Game & Network Services (G&NS)
GN&S segment reported a 16.5 per cent increase in sales to Ą360.7 billion in Q2-2016 as compared to the Ą309.5 million in Q2-2015, which Sony says was primarily due to an increase in PS4 software sales as well as the impact of foreign exchange rates, partially offset by a decrease in PlayStation3 (PS3) software sales.
This segment’s Operating Income increased 9.8 per cent to Ą23.9 billion in Q2-2016 as compared to the Ą21.8 billion in Q2-2015. The gain due to increase in PS4 software sales was partially offset by the negative impact of the appreciation of the US dollar, reflecting the high ratio of US dollar-denominated costs and the above-mentioned decrease in PS3 software sales. During the current quarter there was a 13.1 billion yen negative impact from foreign exchange rate fluctuations informs Sony.
Imaging Products & Solutions (IP&S)
IP&S segment reported a 4.1 per cent improvement in sales to Ą186 billion in the current quarter as compared to the Ą178.6 billion in Q2-2015 due to an improvement in product mix of digital cameras reflecting a shift to high value-added models and the impact of foreign exchange rates, partially offset by a decrease in unit sales of digital cameras reflecting a contraction of the market.
IP&S operating income increased 28.6 per cent to Ą25.9 billion in Q2-2016 as compared to the Ą20.1 billion in Q2-2015. During the current quarter there was a 1.9 billion yen positive impact from foreign exchange rate fluctuations says Sony.
Home Entertainment & Sound (HE&S)
Sony’s HE&S segment reported an almost flat (declined 0.2 per cent) in revenue to Ą289.1billion in the current quarter as compared to the Ą289.7 billion in Q2-2015 due to a decrease in home audio and video unit sales reflecting a contraction of the market, offset by an improvement in product mix of LCD televisions reflecting a shift to high value-added models and the impact of foreign exchange rates.
HE&S operating income reported 73.9 per cent growth in operating income to Ą15.8 billion in Q2-2016 as compared to the Ą9.1 billion in Q2-2015 due to cost reductions and an improvement in product mix, partially offset by the negative impact of the appreciation of the US dollar, reflecting the high ratio of US dollar-denominated costs as well as the impact of the above-mentioned decrease in home audio and video unit sales. During the current quarter there was a 10.4 billion yen negative impact from foreign exchange rate fluctuations.
In Televisions, sales increased 1.6 per cent YoY toĄ 203.0 billion. This increase was primarily due to an improvement in product mix reflecting a shift to high value-added models and the impact of foreign exchange rates, partially offset by a decrease in LCD television unit sales resulting from a strategic decision not to pursue scale in order to improve profitability. Operating income increased Ą4.8 billion YoY to Ą9.7 billion. This increase was primarily due to cost reductions and an improvement in product mix, partially offset by the negative impact of the appreciation of the US dollar, reflecting the high ratio of US dollar-denominated costs, and the impact of the decrease in unit sales.
Devices
Dev ices Sales increased 7.4 per cent YoY to Ą258.1 billion in the current quarter from Ą240.4 billion. This increase was primarily due to the impact of foreign exchange rates and an increase in demand for image sensors, partially offset by a decrease in battery business sales. Sales to external customers increased 17.3 per cent YoY.
Operating income of the segment in Q2-2016 increased Ą4.4 billion YoY to Ą32.7 billion from Ą28.3 billion in Q2-2015 . This increase was due to the positive impact of foreign exchange rates and the above-mentioned impact of an increase in sales of image sensors, partially offset by an increase in depreciation and amortization, an increase in research and development expenses and a decrease in battery business sales. During the current quarter there was a 12.0 billion yen positive impact from foreign exchange rate fluctuations.
Pictures
Sony’s Pictures segment reported 0.9 per cent growth in sales to Ą183.7 billion in Q2-2016 as compared to the Ą182.2 billion in Q2-2015. However, in terms of US dollars there was a 14 per cent decrease due to significantly lower sales for Motion Pictures reflecting lower home entertainment revenues, as the same quarter of the previous fiscal year benefitted from the home entertainment performances of The Amazing Spider-Man 2 and Heaven is for Real, as well as lower television licensing revenues.
Operating loss in the current quarter increased Ą21.4 billion YoY to Ą22.5 billion from Ą 1 billion in Q2-2014 due to the impact of the above-mentioned decrease in Motion Pictures sales as well as higher worldwide theatrical marketing expenses due to a greater number of significant theatrical releases in the current quarter as compared to Q2-2015.
Music
Music reported 15 per cent increase in sales to Ą138.7 billion in q2-2016as compared to the Ą120.6 billion in Q2-2015 due to the impact of the depreciation of the yen against the US dollar. The increase in sales on a constant currency basis was primarily due to an increase in Visual Media and Platform sales reflecting higher live entertainment venue revenue and higher sales of animation products. Best-selling titles included David Gilmour’s Rattle that Lock, Future’s DS2 and Maitre Gims’ Mon Coeur Avait Raison.
Operating income increased 2.4 billion yen year-on-year to 14.6 billion yen (122 million U.S. dollars). This increase was primarily due to an improvement in product mix, reflecting an increase in digital streaming revenues.
Financial Services
Financial Services reported a steep decline of 21.8 per cent in sales in the current quarter to Ą201.7 billion as compared to the Ą269.6 billion in Q2-2015 due to a significant decrease in revenue at Sony Life.
Operating income decreased Ą6.5 billion YoY to Ą41.2 billion mainly due to a decrease in operating income at Sony Life.
All Other
Sales increased 1.0 per cent YoY to Ą87.4 billion in the current quarter from Ą86.5 billion in Q2-2015.
Operating income of Ą0.5 billion was recorded in Q2-2016 compared to an operating loss of Ą19.8 billion in Q2-2015 due to a decrease in PC exit costs, including restructuring charges and after-sales service expenses, as well as the absence of sales company fixed costs charged to the PC business in the same quarter of the previous fiscal year which were allocated based on the prior year results.