Sony targets robust entertainment revenue growth for restructuring

Reuters

Tokyo

Sony Corp aims to lift its movie entertainment revenues by more than a third in the next three years, its chief executive said yesterday as the loss-making consumer electronics firm tries to counter flagging smartphones sales.

CEO Kazuo Hirai has been under pressure to show the entertainment business can be a strong contributor to revenue after rejecting last year a proposal by US hedge fund Third Point to spin off the segment.

Investors are also watching for signs that Sony’s restructuring under Hirai, who was appointed in 2012, is bearing fruit. In September, Sony scrapped dividends for the first time since going public citing deep losses in the smartphone unit.

Speaking at an investor briefing, Hirai promised to unveil a longer-term growth plan for the entire company before end-March, but declined to give details. “I understand that everyone expects me to show how Sony can be changed into a highly profitable company... and to unveil a roadmap towards growth for the overall company,” he said.

Last month, Sony posted a smaller-than-expected second-quarter operating loss, which was hailed by its finance chief as proof the restructuring was working. The result, however was weighed down by its smartphone unit, which was hit by competition from budget Chinese companies.

Hirai said Sony Pictures Entertainment, the unit behind “The Amazing Spider-Man” and TV drama “Breaking Bad”, aims for sales of $10-11bn in the year ending March 2018, up as much as 36% over the $8.1bn forecast for this year.  It would target an operating profit margin between 7 and 8% in the year ending March 2018, up from the 6.6% forecast for this year.

Sony also said it is aiming for revenue of $4.8bn to $5.2bn from its music division in three years’ time, which compares with a forecast of $4.8bn for the current year.

Sony Pictures and Sony Music are forecast to account for around 18% of overall sales this year, slightly more than the mobile business. Sony’s shares closed more than 6% higher at ¥2,478.5, while the Nikkei stock market average rose over 2%.

Atul Goyal, an analyst at Jefferies, said the higher revenue forecast was a reminder that the entertainment unit was valuable for Sony. But even after stopping making personal computers and winding down its smartphone business in China, Sony may have to exit more consumer product lines, he said.  Sony is due to hold another briefing on November 25, when it is expected to outline plans for its electronics divisions, including smartphones.