New strategy helps Sony posts record 1Q profit

Japan's Sony reported record first-quarter profit on Tuesday as sales of game software surged, and bumped up forecasts for gaming and chips, lending support to a new strategy focused on stable income.

The result is the first since Sony pledged to maintain high profit levels after beating its 1998 annual earnings record last year. To that end, Sony has been expanding businesses promising stable revenue streams, such as online gaming services and music content libraries, while minimizing the impact of the volatile sales cycles of game consoles and other electronic gadgets.

The gaming business "has gradually changed with the addition of new revenue sources such as PlayStation Plus," Chief Financial Officer Hiroki Totoki said at a briefing, referring to subscription-based online services. "We aim to stabilize our profit base by taking advantage of such new revenue sources."

Profit jumped 24 percent in April-June to 195 billion yen ($1.75 billion). The average of eight analyst estimates compiled by Thomson Reuters I/B/E/S was for an 8 percent decline.

Growth was even sharper, at 61 percent, when excluding the previous year's one-time gain from the sale of Sony's camera module unit and receipt of insurance payouts for quake damage.

In gaming, profit rose almost five times to 83.5 billion yen, as high-margin online software and Sony-made titles such as "God of War" compensated for slowing sales of PlayStation 4 consoles.

The popularity of new titles led Sony to raise its annual PlayStation 4 sales view by 6 percent to 17 million consoles, slightly below the previous year's 19 million. Analysts expect the September launch of "Marvel's Spider-Man" to further lift gaming profit.

Separately on Tuesday, gaming peer Nintendo reported an 88 percent jump in first-quarter profit as sales of Switch game titles more than doubled, offsetting disappointing console sales.

SENSOR GROWTH

Sony's semiconductor division - the beneficiary last year of a unit sale and insurance payouts - saw profit almost half to 29.1 billion yen. The division includes sensors, which Sony expects to grow in the mid-to-long term as applications expand to vehicles, factory automation, surveillance and depth sensing. Its imaging sensors have long benefited from smartphone demand.

"The mobile market's growth may slow down even further," Totoki said. But sensor demand could rise as handsets increasingly feature multiple cameras, while sensors for other purposes could be introduced, he said.

Sony lifted its annual profit outlook for semiconductors by 20 percent to 120 billion yen, and for gaming by 32 percent to 250 billion yen. It kept its profit forecast for the year ending March at 670 billion yen, down 9 percent on year, citing various risks including competition in smartphones. The average of 24 analyst estimates is 755 billion yen.

Increasing smartphone competition means Sony "may need to cut the smartphone business outlook further or revise the current midterm business plan," Totoki said.

($1 = 111.2500 yen)

(Reporting by Makiko Yamazaki Editing by Christopher Cushing)