* Q1 operating profit doubles on games, asset sale
* Sony warns will just break even on smartphones this FY
* Leaves fiscal year financial forecasts unchanged
(Adds smartphone industry context, earnings details)
By Sophie Knight
TOKYO, July 31 Japan's Sony Corp warned
it doesn't now expect to make money on smartphones this year,
citing weak demand, as the consumer electronics maker said
restructuring will still help it turn a profit on its TVs after
10 years of losses.
As it said April-June operating profit doubled, boosted by
its videogames business and a one-off asset sale, Sony on
Thursday cut its smartphone sales target this fiscal year by 14
percent. Sony now expects to just break even in the business
this year, down from a previous operating forecast of 26 billion
yen ($253 million), and is reviewing its mid-term strategy.
Analysts had said the initial smartphone sales target was
too ambitious amid stiff competition from Apple Inc and
Samsung Electronics Co Ltd at the top end of the
market, and cheaper Asian electronics firms at the bottom.
Samsung Electronics also flagged its own uncertain handset
earnings prospects on Thursday, undercut by Chinese rivals like
Xiaomi, while Sony said progress by Chinese smartphone makers
was a factor in its own sales shortfall.
"It is possible the (smartphone strategy) review might
result in an impairment charge against various assets in the
mobile communications segment," said Sony's newly installed
chief financial officer Kenichiro Yoshida. Despite the
first-quarter surge, he said Sony would stick to fiscal year
forecasts of a 140 billion yen operating profit and a 50 billion
yen net loss - the company's second straight year in the red.
"We are also discussing whether to change the number of
phones in our line-up and adjust their lifecycle," Yoshida said,
speaking at a news conference after the company released its
results on Thursday.
Sony now expects to sell 43 million smartphones this year,
down from 50 million - a previous target corporate planning
director Hiroki Totoki described on Thursday as "a little
With Yoshida helming restructuring plans, Sony has vowed to
turn a profit on its flagship electronics division this year,
come what may. The firm is cutting 5,000 jobs and spinning off
its TV division into a separate company, a move chief executive
Kazuo Hirai has said will increase accountability at the
For the fiscal year, Sony on Thursday shaved 3 percent off
its TV sales target, cutting it to 15.5 million from 16 million
previously. That was despite quarterly sales growing 10.5
percent as Sony sold a higher proportion of premium models,
including high resolution 4K sets.
In the fiscal first quarter ended June, Sony's operating
profit climbed to 69.8 billion yen ($679 million) from 35.5
billion yen a year earlier. That easily beat the 16.6 billion
yen average of six analysts' estimates according to Thomson
Across the company as a whole, net profit surged to 26.8
billion yen in the first quarter from a meagre 3.13 billion a
year earlier. Revenue rose 5.8 percent to 1.81 trillion yen.
Sony said a 14.8 billion gain from the sale of a technology
centre in Japan inflated first-quarter operating profit, while
its financial services business again delivered the lion's share
Lifted by the success of its PlayStation 4 videogame
console, Sony's games and networks division - the focus of much
of the company's strategy going forward - also turned in a
strong performance, doubling revenue and reversing into profit
after losses a year earlier.
Sony raised its operating profit forecast for the games and
networks division by a quarter to 25 billion yen - equal to two
and a half times the profit it expects in the division housing
its TV business.
CFO Yoshida, with a reputation for plain speaking, warned
the strong first quarter didn't yet mean the company could
afford to aim for higher earnings this year.
"We have topped our targets (in the first quarter), but if
you look at our past, we have made our targets in most first
quarters but then haven't been able to meet our full-year
targets," CFO Yoshida said. "I want to see how the rest of the
Separately Sony also said it would set up a joint venture
with Panasonic Corp and Japan Display Inc to
develop organic light-emitting diode (OLED) displays, with the
government-backed Innovation Network Corp of Japan taking a
($1 = 102.8400 Japanese Yen)
(Reporting by Sophie Knight; Editing by Kenneth Maxwell)