Sony, Canon to shine as Japan elec makers report
TOKYO (Reuters) - Sony Corp. (6758.T) and Canon Inc. (7751.T) are expected to deliver strong results as Japanese electronics makers gear up for quarterly earnings this week, driven by robust digital camera sales and a softer yen.
In contrast, plasma TV makers such as Matsushita (6752.T) and Pioneer Corp. (6773.T) are likely to report weak results, having lost dominance of the market for large TVs to the more popular liquid crystal display sets (LCD).
Sony, which ruled the $30 billion video game industry over the last decade, has seen tepid demand for its latest game console, the PlayStation 3, launched in November.
But this has been more than offset by growing demand for digital cameras and camcorders, higher profit at its mobile phone venture with Ericsson (ERICb.ST) and a weaker yen, which boosts its overseas earnings when converted into the Japanese currency.
"There was a time when Sony's game unit earned most of the group profit and people said Sony is practically a game company," Mizuho Investors Securities analyst Mitsuhiro Osawa said.
"But its electronics division started to show signs of a revival last year. The pace of its recovery is picking up this year and it seems to be able to hit an operating margin of 5 percent."
Chief Executive Howard Stringer, the first non-Japanese to run Sony, has been targeting a 4 percent margin for its mainstay electronics division for the current business year to March 2008, and a 5 percent margin on a consolidated basis.
Sony President Ryoji Chubachi told Reuters in an interview this month operating margin at the electronics division, which makes Bravia LCD TVs and Cyber-shot digital cameras, was likely to exceed the 4 percent target.
Analysts on average expect Sony to post an operating profit of 51.85 billion yen ($428.3 million) for April-June, up from 27.05 billion yen a year earlier, according to Reuters Estimates.
UPWARD REVISION
Camera and office equipment maker Canon, Japan's most valuable technology stock with a market capitalization of about $79 billion, benefited from strong demand for color printers and copiers and break-neck growth in sales of single lens reflex (SLR) cameras -- high-end models that use interchangeable lenses.
"Digital SLR camera demand has recently been growing at a rate of 70 percent, and we expect this market to double in three years," JPMorgan analyst Hisashi Moriyama said.
"Canon is by far the largest player in that market. If the market doubles, it is obvious the top maker's sales and profit will grow."
Moriyama expects Canon, which aims for an eighth straight year of earnings growth, to raise its operating profit forecast for 2007 above 800 billion yen from 790 billion yen.
Nikon Corp. (7731.T) and Olympus Corp. (7733.T) will follow rival Canon in posting solid results, while brisk demand for copiers and printers are expected to help send Ricoh Co. Ltd. (7752.T) and Konica Minolta Holdings Inc. (4902.T) to higher quarterly profits, analysts say. Continued...
