Sony Looking to PlayStation to Shore Up Finances
Over the last few years, quarterly financial results time hasn’t been Sony’s friend. The company has been hurting on the income statement and balance sheet thanks to underperformance from their TV and mobile device divisions. However, they have been buoyed by the sales success of the PlayStation 4.
Now, Sony is trying to turn back towards profitability and is putting the PS4 at the forefront of their plan.
The first part of Sony’s financial plan involves cost cutting in their TV and smartphone product lines to improve profitability. In a call with investors, Sony said that the cut plans would allow for profitability even if sales of those divisions fell by 30%.
Sony is also hoping for a boost in sales from their gaming and image sensor divisions. Sony is looking for an increase in gaming revenue of about 25% to $13.6 billion powered by the various media distribution services that Sony is offering on the PS4. Presumably, holiday sales of games and consoles won’t hurt them either.
The guidance for their image sensor division is even more aggressive with Sony targeting a 70% sales boost to $12.8 billion. Their image sensors are already included in iPhones and have a growing foothold in the Chinese smartphone market with their sensors. Depending on adoption in the smartphone and tablet markets, they have room to grow in that market as those they supply grow sales to the end consumer.
There’s a big difference between Sony, Microsoft and Nintendo. It’s all about how important games are to their company. Microsoft has so much going on in the software space (between Windows and Office) that games aren’t a critical component. Nintendo, on the other hand, is solely a gaming company. They need the hardware sales to allow them to get the software sales since they’re the only ones making games for their consoles.
Until these last few years, Sony fell somewhere in the middle. Their gaming division was more important than Microsoft’s to the overall health of the company but nowhere nearly as important as gaming is to Nintendo. Now, Sony’s success relies on that of the PlayStation 4. Right now, it’s so far, so good. As long as they can get consoles out in the early and mid parts of the console’s life cycle, they can make up lower consoles sales late in the life cycle with their royalty on software sales. Still, it’s a lot of pressure on a division to turn it into the financial focus of a major company.