Sony Cuts Profit Outlook on Weaker PlayStation Prospects

(Bloomberg) -- Sony Group Corp. cut its profit outlook as its PlayStation division faltered and game sales slumped.

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The Tokyo-based entertainment conglomerate said on Friday that it now expects 1.11 trillion yen ($8.3 billion) in operating profit, down from 1.16 trillion yen previously. The gaming and network services group, which houses the PlayStation business, accounted for the full revision, taking a 16% cut from 305 billion yen to 255 billion yen.

Sony revised its outlook on costs related to its acquisition of Bungie Inc., the weaker yen and lower expectations for third-party software sales on the platform. The company’s games underwhelmed in the April-June quarter with 47.1 million sales of PlayStation 4 and 5 titles, down from 63.6 million in the same period a year ago. Play time across PlayStation products was down 15% in the quarter, Chief Financial Officer Hiroki Totoki said, and PlayStation Plus members fell slightly to 47.3 million.

Sony’s PlayStation 5 hardware production has been limited by chronic supply chain bottlenecks exacerbated by extended Covid-19 lockdowns in China over the past three months. The company sold 2.4 million PlayStation 5 units in the period, slightly better than the 2.3 million from a year ago.

“While we stand pat on our projection of selling 18 million units of PS5 this fiscal year, conditions surrounding PlayStation 5 are improving,” Totoki said on an investor call after the earnings were released. “We plan to front-load shipments for the year-end shopping season.”

The company’s April-June operating profit of 307 billion yen beat average estimates of 286.7 billion. Movies and music results were boosted by the yen’s weakness and Sony said it now expects higher revenue from its music division because of the positive currency impact. Revenue from streaming services and anime content helped sustain the good results.

Investors will be looking for signs that Sony can weather the current macroeconomic challenges by relying on the rest of its portfolio beyond the keystone PlayStation business. Camera image sensors, Sony’s other big hardware initiative, also got a cut in its sales forecast, however Sony maintained its profit outlook for the division on the expectation of a sustained foreign exchange tailwind.

Supply chain snarls will likely continue to trouble electronics makers this year as the re-emergence of Covid infections and Russia’s invasion of Ukraine affect shipping, production capacity and the cost of materials. South Korean giant Samsung Electronics Co. said a day earlier that it’s adjusting its forecast on an almost daily basis because of the high degree of geopolitical volatility and economic uncertainty. Component makers, logistics specialists and manufacturing machinery providers have expressed skepticism that the supply chain can return to normal operation this year.

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(Updates with CFO comments)

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