The stock slumped 8.2% by midday in Tokyo on Monday, the most since June 2016 on an intraday basis, after operating income in games fell 14% to $666mn for the holiday quarter. The Tokyo-based company sold 8.1mn PS4 consoles, down from 9mn a year ago, it said in a statement.
The Playstation 4, headed for its sixth year, will likely surpass the 100mn unit sales milestone by mid-2019, cementing it as one of the best-selling consoles in history. Even so, this year’s software lineup isn’t as impressive as it was last year, when blockbuster titles like God of War, Spider-Man and Red Dead Redemption 2 made their debut. For the full fiscal year, Sony kept its forecast for the games division of $2.8bn.
“Strong profits from game software were offset by higher promotional and marketing costs aimed at driving PS4 volumes,” Damian Thong, an analyst at Macquarie Group Ltd., wrote in a report after cutting his rating to neutral.
“We are moving to the sidelines until we can better assess the risks in the Games segment.” He added.
Additionally, Goldman Sachs Group Inc. and Nomura Holdings Inc. cut their price targets on Sony’s stock. For total sales, Sony lowered its outlook to $77.4bn for the fiscal year through March, compared with the prior forecast for $79.2bn. Weaker demand for camera chips, mobile handsets and financial services were behind the revision although a tax adjustment will boost net income.
The figures underscore the struggle that big technology companies face—one that of slowing demand for their products and services. Apple Inc. reported a decline in revenue for the first time in two years, while chipmakers Interl Corp. and Nvidia Corp. have warned of weaker sales, as China’s economy starts to sputter and uncertainty looms over Brexit.
“It’s definitely not as positive as the headline numbers would suggest. It feels slightly negative overall,” stated Andrew Jackson, head of Japanese equities at Soochow CSSD Capital Markets in Singapore.
Operating profit in the last three months of 2018 was $3.4bn, compared with analysts’ projection for $332bn. After adjusting for a one-time gain in the music business, the result was significantly lower, at $236bn. Quarterly sales fell 10% to$21bn.
With fewer games in store for the already-aging Playstation 4 and Sony’s own Xperia phone business still losing money, Chief Executive Officer Kenichiro Yoshida will have to prove that Sony’s turnaround can continue instead of peaking this year. The mobile division continued to struggle, with an operating loss of $141mn during the quarter, the fourth straight period. Yoshida has so far rebuffed pressure to sell off the unit, stating that it is vital for pushing innovation including 5G-related research.
“The market is closely watching for a turnaround in the mobile communications business, but it looks things are worse year-on-year due to a decrease in smartphone unit sales,” Jackson stated.