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Sony surprises with Q1 profit, raises outlook

Tokyo, July 29, 2010

Sony Corp lifted its annual outlook and returned to profitability in the first quarter on booming demand for its Bravia flat TVs and PlayStation 3 game consoles.

Rivals Panasonic Corp and Sharp Corp also reported profits for April-June versus losses a year ago, while Panasonic joined Sony in upgrading its forecast as both firms cashed in on growing sales in emerging markets.

Panasonic unveiled plans for a $5.7 billion share offering to help finance a buyout of Sanyo Electric and another unit as it seeks to cut overlap and expand sales of energy and environment related products.

The increased profit targets suggest a road to recovery for Japanese electronics makers as consumers and companies revive spending.

However, the yen's persistent strength and tough competition with South Korean rivals such as Samsung Electronics and LG Electronics remain key risks.

Japan's electronics giants are also keeping a wary eye on the impact of the debt crisis on European demand, which accounted for more than 25 per cent of Sony's sales last year.

"It (Sony) did well in the April quarter with aggressive marketing, especially in its TV business, but its growth rate will slow down in the current quarter because overall TV sales are weakening in line with a softening global economy," said Park Young-Joo, an analyst at Woori Investment and Securities in Seoul.

Sony, the world's second-largest camera maker after Canon, reported April-June operating profit of 67 billion yen ($766 million) versus the consensus for a 13 billion yen loss in a poll of four analysts and a loss of 25.7 billion yen a year ago.

The Japanese firms' results were more upbeat than LG Electronics, which announced a worse-than-expected 90 per cent fall in quarterly profit on Wednesday, hit by poor TV and mobile handset sales.

Emerging markets fuel growth

As well as improving demand for Bravia LCD TVs and Vaio PCs, sales of Sony's PlayStation 3 game consoles, which can now be used to play several 3D games on Sony's 3D TVs, more than doubled to 2.4 million units.

Sony has also benefitted from the aggressive cost-cutting implemented in the last financial year by its Welsh-American chief executive, Howard Stringer, a former TV newsman and one of the few foreigners to head a major Japanese company.

"Sony's results far exceeded market expectations. The main drivers were stronger demand for electronics products and solid demand from China and emerging markets like Latin America," Anita Huang, manager of ING's Japan Fund, said.

She said the fund plans to buy more shares of Sony due to the better-than-expected results.

After Sony scraped into profit for the year to March 2010 largely on the back of income from its financial services division, Chief Financial Officer Masaru Kato lauded the latest results as a return to the company's roots.

"The real driver of our growth should be the products, services and contents that we offer to customers," he told a news conference on Thursday, singling out new hit products such as a lightweight camera with interchangeable lenses launched last month.

Electronics sales in developing markets are up about 40 per cent on a year ago on average, Kato added.

Some analysts said the NEX cameras, which combine light weight and compact size with some of the features of professional digital cameras, such as interchangeable lenses, could help Sony to take a big bite out of both compact and single-lens reflex markets, potentially pushing Canon off the top spot.

Stringer has said he believes Sony is well positioned to take advantage of consumer interest in 3D products, given that it has a treasure trove of film and gaming content to back up its hardware offerings.

Sony shares rose 0.1 per cent ahead of the announcement, while Sharp lost 1 per cent and Panasonic tumbled 7.7 per cent in heavy volume in a fall triggered by an earlier Reuters report of its capital raising plan. – Reuters




Tags: Sony | profit | Tokyo | Q1 |

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