Shares of Sony Corp hit a five-year high
The Japanese electronics and entertainment giant's stock closes up 2.6 per cent at 6,630 yen after climbing as high as 6,750 yen.Updated: May 17, 2007 19:20 IST
Shares of Sony Corp hit a five-year high on Thursday after it forecast a six-fold surge in group profit this year and said losses in its game unit would shrink by 80 per cent as it boosts sales of the PlayStation 3.
The Japanese electronics and entertainment giant's stock closed up 2.6 per cent at 6,630 yen after climbing as high as 6,750 yen, a level last seen in June 2002. The benchmark Nikkei average closed down 0.17 per cent.
Sony expects its game segment to post an operating loss of about 50 billion yen ($414 million) in the year to next March, down from a 232 billion yen loss in 2006-07, Senior Vice President Takao Yuhara said on Thursday.
The once high-flying game unit faces tough competition from Nintendo. Sales of the feature-packed PlayStation 3 game machine missed expectations in a console race against Microsoft's Xbox 360 and Nintendo's Wii.
Sony sees a sharp rise in PS3 hardware shipments to 11 million units this year. In 2006/7, it shipped 5.5 million PS3s, which fell below the company's initial target, and of those about 3.6 million units were actually sold.
While Yuhara has said its strategy for PS3 is to expand its game titles, overall software shipments are expected to fall this year to 250 million units due to shrinking demand for games used for its older PlayStation 2 consoles. In 2006-7, Sony shipped 261.3 million software units, including 13.2 million for PS3.
Sony, which has lost the lead in key products like portable music players as well as in games, also said it estimates sales at its main electronics unit to rise 4-6 percent in 2007-8 from 6.05 trillion yen a year earlier, led by strong demand for its flat-screen TVs and digital cameras.
Games once were a key revenue driver for Sony. But the PS3, loaded with a high-definition DVD player and cutting edge graphics, has so far acted as a drag on results, with its core electronics business now pushing growth.
Sony on Wednesday posted a wider quarterly loss due to the cost of the PS3 launch, but forecast a bigger-than-expected operating profit of 440 billion yen for the year to March 2008 led by strong sales of key products like its Bravia brand liquid crystal display TVs and Cyber-shot cameras.
Even after discounting one-time gains like a 59 billion yen gain on a land sale, Sony is still attractive, said Deutsche Securities analyst Yasuo Nakane, who kept his "buy" rating on Sony and target price of 7,100 yen.
"Following disappointing forecasts from companies like Funai and Casio, markets are simply relieved to find Sony meeting expectations," Nakane said.
The company was also hit hard last year by massive costs to recall 9.6 million units of its laptop PC batteries, which in rare cases could catch fire from overheating.