Sony turns a profit thanks to PS4, but Xperia looks in deep trouble

Vaughn Highfield July 30, 2015

Sony’s first quarterly earnings of 2015 show a threefold net profit increase, to ¥82.4 billion (£425m), thanks mostly to the PlayStation 4.

However, while things certainly sound rosy, its Xperia smartphone division and Bravia TV range are hurting the Japanese tech giant more than ever.

While its PlayStation-branded gaming division saw a sales increase of 12.1% year on year, to ¥288.6 billion, its Xperia smartphone division lost 16.3% year on year, bringing in a total of ¥280.5 billion, down ¥33.8 billion. Its slowly failing Bravia TV business also dropped an unhealthy 17.6% year on year, bringing in ¥168.9 billion.

While its TV and smartphone business isn’t doomed, it’s clear that Sony’s PlayStation division is saving the company. Or is it?

A PS4-powered future for Sony?

Sony turns a profit thanks to PS4, but Xperia looks in deep trouble - PlayStation 4 Andrew House

While Sony’s gaming division looks the workhorse most likely to push up its profits further, especially with Sony’s Project Morpheus virtual-reality headset coming at the end of the financial year, there’s another aspect of the business that has the potential to bolster its earnings in a bigger way.

In Q3 of 2014, Sony’s devices arm – responsible for sensors, semiconductors, batteries and so on – grew 38.6%. It ended the 2014 financial year with a further 23.9% growth and has grown by 35.1% so far in 2015. No other part of Sony’s business is growing so quickly.

Naturally, Sony is doubling down in its devices business, pulling back investment in its Xperia phones, shrinking its television business and putting it all into increased production of imaging sensors.

This is undoubtedly a smart move, as Sony’s camera sensors can be found in Apple’s iPhone, Samsung’s Galaxy phones and many others. If it can stay ahead of the game with its Exmor image-sensor technology, it shouldn’t lose out on business to cheaper, inferior rival components.

Can the Xperia brand bring it back for Sony?

With Sony feeling the pressure from cheaper Asian rivals like Huawei, it’s unlikely the Xperia range can claw back in to profit itself. However, it still brings in a sizeable amount of money each year – an amount similar to Sony’s growing financial business – so it’s hard to imagine it being jettisoned any time soon.

In Sony’s revised forecast for the year ahead, it doesn’t see an overly healthy future for its smartphone brand, stating: “Sales are expected to be lower than the April forecast, primarily due to an expected decrease in smartphone unit sales.” In a nutshell, Sony’s solution equates to “cut some prices and hope for the best”.

After Sony’s terrible financial year in 2014, it made changes to how it handles its mobile business, shrinking its portfolio and reducing its marketing efforts. This move can be seen both in its company restructure and in its decreasing smartphone revenue – offset only by the savings it’s making from a smaller marketing campaign.

Sony is hoping this financial year goes swimmingly and has predicted a slight decline in sales revenue, but a healthy ¥266 billion increase in net income due to smaller marketing overheads, a reduced workforce and the refocusing of its failing divisions.