Sony bids farewell to lean times, shares soar 11%

Sony is prospering again. Shares climbed 11 per cent to their highest since 2008, after the company increased its annual operating profit outlook to a record 630 billion yen ($5.6 billion). That exceeded the 591 billion yen average that analysts were projecting.

Demand for high-end 4K televisions and wider use of camera chips helped to make up for slower growth in the PlayStation business and a lack of blockbuster films. The revenue forecast for the period was raised to 8.5 trillion yen from 8.3 trillion yen. Since taking charge in 2012, Chief Executive Officer Kazuo Hirai restructured the Tokyo-based company and invested in key divisions, helping to restore the company’s reputation as a manufacturer of high-quality electronics products.

“This is a blow-out set of results,” Atul Goyal, an analyst at Jefferies Group, said of the just-ended quarter, which also topped projections. Sony shares were up 11 per cent at midday in Tokyo on Wednesday, at 4,886 yen, their highest since June 2008.

In the September quarter, Sony posted an operating profit of 204 billion yen, topping analyst projections for 139 billion yen in the period, according to estimates compiled by Bloomberg. Net income was 131 billion yen, better than the prediction for 81 billion yen. A more favourable exchange rate also helped to fuel revenue, which topped estimates at 2.06 trillion yen.

“Hirai is indeed hitting full stride here,” said David Dai, an analyst at Sanford C Bernstein & Co. “The 630 billion yen forecast is not a complete surprise as their previous guidance, 500 billion yen, was known to be overly conservative. But the raise shows management is now confident in meeting the higher target.”

Sony also unveiled on Wendesday a new iteration of its robotic pet dog, aibo, which was discontinued in 2006.

Sony has invested billions to develop state-of-the-art image sensors, a move that is beginning to pay off as smartphone makers embrace the use of multiple cameras to improve image quality and create augmented reality features.

Operating profit from chips rose to 49 billion yen during the quarter, compared with a loss of 4.2 billion yen a year ago, when the division was still recovering from damaging earthquakes in Kyushu. Revenue rose 18 per cent to 228 billion yen.

Apple, Xiaomi and other smartphone makers are outfitting their latest models with two cameras on the back of each device. This lets software compare two pictures to improve photo quality and gauge depth to perform basic AR functions.

“The biggest earnings driver is chips,” Masahiko Ishino, an analyst at Tokai Tokyo Securities, said prior to the results. “Dual cameras are becoming the norm in phones. As we enter a phase where 20, 30 or 40 per cent of phones begin to carry dual cameras, we’re going to see that continue to lift Sony’s earnings into next year and the year after.”

Sony held 42 per cent of the image sensor market as of last year, according to researcher Yole Developement. Besides image sensors, it’s now investing in 3-D sensors that can detect their environment by calculating how long it takes for light to reflect off surfaces. Mass production is slated for next year, with the new chips set to be adopted by next-generation AR devices and self-driving cars.