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Sony Returns to Profit in Q1

Movie segment is mixed; company quiet on spin-off proposal

TOKYO — Sony Corp. headed back to black in the first quarter of the current fiscal year, with $35.5 million in net profit, compared with a loss of $250 million the same period in 2012.

The company also reported a boost in operating profit to $370 million for the first quarter, representing a nearly 500% year-on-year gain, while sales soared 13% to $17.4 billion.

But it made no official comment on the possibility of spinning off its movies (“pictures”) division.

Sony attributed the profit gains mainly to stronger sales of smartphones, higher earnings from its financial services division and favorable exchange rates.

Meanwhile, the pictures segment, long a steady money-earner, delivered $37.5 million in operating profit, versus a loss of $50 million in the same quarter a year ago. Sony said the increase was mostly due to the sale of SPE’s music publishing catalog, which added $106 million to the bottom line. Theatrical and home entertainment earnings declined, including a softer-than-expected B.O. for “After Earth.” But savings in theatrical marketing expenses compensated for the drop.

Sony has been under pressure from leading shareholder Daniel Loeb to spin-off part of the pictures segment, but according to a report in today’s Nikkei newspaper the company’s directors have rejected this plan, saying Sony can achieve better results by tightening ties between its entertainment and core electronics businesses.

Board leans toward spinoff rejection

In response to a question about the Nikkei story, chief financial officer Masaru Kato said only: “The board of directors will thoroughly discuss [Loeb’s proposal] and make a decision. We are in the process [of discussing it.”

The ‘home entertainment & sound’ segment, which includes Sony’s long-ailing television manufacturing business, recorded a $34.5 million operating profit, compared to a loss of $101 million in Q1 last year. Sales also grew by 9.3 percent to $2.8 billion. A weakening of the yen, as well as substantial improvement in television results were cited as reasons for the brighter numbers. Sales of TVs gained 18.2 percent to $1.87 billion, while operating profit rose to $53 million, a marked improvement over the $67 million loss recorded in Q1 last year. Sony prexy Kazuo Hirai has made the division a priority, aggressively cutting costs.

Also, the ‘mobile products & communications’ segment, which includes smartphones and PCs, reported a rise in operating profit to $60 million, against a $285 million loss the same period last year, while sales grew 36% on a yen basis to $3.94 billion.

The game segment, hit by slowing sales of hardware for various versions of its PlayStation products, as well as R&D expenses for the new PS4, recorded flat sales and an operating loss of $150 million.

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