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Sony’s Sensor Business Slows Down Even as Cost Cuts Lift Profit

Japan’s Sony Corp on Thursday reported an annual loss in its image sensors business, raising fears the firm’s revival of recent years may be losing momentum, even as cost cuts helped it book its biggest annual operating profit in eight years.

Annual operating profit more than quadrupled to JPY 294.2 billion ($2.70 billion) for the year ended March due to cost cuts in its struggling smartphone business and brisk demand for PlayStation 4 videogames.

But the electronics maker said its devices business, including image sensors which have been central to its recovery, swung to a loss of JPY 29 billion from a profit of JPY 89 billion a year prior.

Sony has been shifting attention over the past two years to higher-margin products such as sensors from consumer electronics such as televisions and mobile phones, under an overhaul led by Chief Financial Officer Kenichiro Yoshida.

But a global slowdown since late last year in the market for high-end smartphones – which feature high-spec cameras – has dented sensor sales. Its major clients include Apple Inc, which on Tuesday reported its first-ever decline in iPhone sales as it struggles with an increasingly saturated market.

“We have placed image sensors at the core of our growth story, so we take the deterioration in results there very seriously,” Yoshida told a news conference on Thursday. “The smartphone market has entered a stage of slow growth.”

As it had previously flagged, Sony did not issue any earnings guidance for this business year as it continued to assess the impact of earthquakes this month that halted production at its image sensor plant in southern Japan.

On Thursday, it said it expects production to resume around the end of May. The disruption, it said, could cause “major” opportunity losses.

In another worrying sign for the country’s recovering tech names, Panasonic Corp forecast profit to fall in the current business year while growth in emerging markets slows and as it spends on high-end electronics and increasingly lucrative automotive technologies.

The company said it expects operating profit of JPY 375 billion, down from JPY 416 billion in the previous year under US accounting standards.

It had flagged the weaker outlook last month, showing that even one of the strongest of Japan’s consumer electronics companies is struggling to grow as the domestic economy grapples with weak consumer spending and slowing exports to China.

© Thomson Reuters 2016

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