Sony Q3 2016 Earnings: Mobile phone sales down 35 percent year over year

Sonys' movie studio

Sony’s mobile phone sales decreased 35.3 percent year-over-year to roughly $2.14 billion USD in the third quarter of 2016ending on December 31st, 2016.

The downturn is primarily due to a reduction in smartphone unit sales, the majority of which were in Europe. There were also unprofitable regions where downsizing measures were implemented during the previous fiscal year.

As a result, profits fell $25.7 million year-on-year to 183 million USD. During the current quarter, there was a $1.07 billion positive impact from foreign exchange rate fluctuations.

Hollywood hangups

However, the biggest blow to the company came from Sony Pictures, which posted a $913 million USD loss. Revenue fell to $1.94 billion for the fiscal third quarter, compared to $2.18 billion in the same three-month period in 2015.

The four movies Sony released during this time – Inferno, Arrival, Billy Lynn’s Long Halftime Walk and Passengers – underperformed at the box office. Overall, the company saw an 84 per cent drop for October to December.

Looking at Sony Corporation as a whole, revenues declined by seven per cent to $20.7 billion. Eleven per cent was cut off from the full-year operating profit outlook, to about $234.7 million.

These financial results follow Sony Entertainment CEO Michael Lynton’s recent announcement that he’s leaving the company to join Snapchat-parent Snap as charman. Lynton is stepping down today (February 2nd), but will remain co-CEO of the entertainment division for six months alongside Sony CEO Kazuo Hirai as they search for his replacement.

“There has been a suspicion in the market that Sony doesn’t have a firm grip on the movie business, but still the amount is a surprise,” Kazunori Ito, an analyst at Morningstar Investment Services, told Bloomberg. “That said, with Lynton’s departure and this writedown, all the bad news is out and the attention can turn on their plan for the coming fiscal year.”

In recent years, Sony has also had to deal with the major confidential data breach from the November 2014 hacker attack. This has cost the company millions of dollars, on top of the resulting political and legal blowback.

Looking to the future

Despite these losses, coupled with rumours that the sale of Sony Pictures could be in the works, Sony insists that the film division remains an integral part of the company.

Instead, Sony says it’s hopeful for the 14 movies it has coming out in 2017. Notable releases include last month’s Resident Evil: The Final Chapter, Spider-Man: Homecoming in July, which was co-produced with Marvel Studios in an unprecedented partnership, and Jumanji in December. Eleven films are also slated for 2018.

Under chairman Tom Rothman, the company is looking to exercise greater financial discipline and introduce new film franchises, specifically pointing to The Dark Tower, based on Stephen King’s hit novel series. Sony also plans to make movies based off its gaming IPs, including an adaptation of the popular Uncharted series

Its PlayStation brand was a bright spot in its earnings report due to increased software sales and the launch of PlayStation VR in October 2016. A 5.2 percent increase in sales to $5.3 billion was recorded for the quarter.

Profits for the Game and Network Services division were up 24.5 percent, helped by price reductions for its PS4 console during the holidays. Altogether, it’s been selling at a record pace, with over 50 million units since it launched in November 2013.

Source: Sony