Sony dreams big, targeting $4 billion profit by 2018
Sony has set the bar high as it works to hoist itself out of its deep financial hole.Looking months ahead, the struggling electronics company said Wednesday that forits 2017 fiscal year, ending in March 2018, it believes it can generate an operating profit of over 500 billion yen (about $4.2 billion). That would be a big leap from the 26.5 billion yen operating profit -- and 128.4 billion yen net loss -- the company posted during its last full fiscal year, which wrapped up last March.It's an even heftier haul from the poor showing Sony is expecting for its current fiscal year, which ends next month -- an operating profit of 20 billion yen and a net loss of 170 billion yen. On the positive side, that's up from Sony's earlier forecast of a 40 billion yen operating loss and 230 billion yen net loss.The company now says that it will look for growth by focusing its efforts in four areas: the PlayStation gaming division, Sony Pictures, Sony Music and its devices business, which includes sensors and other components."Sony is positioning Devices, Game & Network Services, Pictures, and Music as the segments that will drive its profit growth over the next three years," the company reported to investors on Wednesday. "It will implement growth measures and engage in aggressive capital investment in these areas with the aim of achieving both sales growth and profit expansion."Wednesday's announcement marks another shift in strategy for Sony as its tries to keep its footing in a rapidly changing technology landscape.Three years ago, in an earlier attempt to return Sony to profitability, newly appointed CEO Kazuo Hirai unveiled an initiative known as One Sonythat would focus on three coredivisions: digital imaging, gaming and mobile. Of that trio, now only gaming has a central place in Sony's grand vision for achieving growth, and Wednesday's note on the new three-year plan made no mention of One Sony.Sony was once one of the dominant forces in the technologyindustry. Many of its products, including televisions, gamingproducts, and devices like the Walkman music player, established Sony as a leader and helped it achieve billions ofdollars in profits in the 1990s and early 2000s. By the start of this decade, however, the company's business had started to falter as thePlayStation 3 initially failed to gain traction, the Walkman was adistant memory, and everything from digital cameras to mobile devices were getting hit hard by competitors.Mobile devices in particular became a pain point and a source of losses. Companies like Samsung,Apple, and countless China-based handset makers are the forces to be reckoned with in that critical market.In a statement Wednesday, Sonyacknowledged the challenges it faces in mobile, describing that market as "characterized by high volatility and challenging competitive landscapes" and adding that it "willplace the highest priority on curtailing risk and securing profits." Thecompany will also only focus its mobile efforts on certain territories andwill create a new "business structure capable of securing profits." Sony alsohasn't ruled out the possibility of selling the mobile division, though so far it is indicating that it wants to return the unit to profitability.Thesame mentality holds true for Sony's television division, which became a separate subsidiary last year. Here, too, the company said it will be careful to target individual markets, butstopped short of saying whether it would sell off the subsidiary afteryears of calls from investors to do so.Sony did say Wednesday that it's planning to spin off more business segments, starting with its video and sound unit, which it said would be split out into a wholly owned subsidiary starting in October.The company sees the video and sound unit, along with imaging products, as "stable profit generators," with sales remaining flat over the next few years and Sony will decrease its capital investment, believing that it's in a solid position in those markets."By capitalizing on its existing technological expertise in these areas rather than engaging in large-scale investments, and by optimizing fixed costs and enhancing inventory control, Sony will aim to maximize profits and return on investment," the company wrote to investors.The areas that will garner increased investment are what Sony now sees as its four "growth drivers"over the next three fiscal years: gaming, devices, music, and films and TV shows.Sony's PlayStation business has been soaring in recent quarters assales of its PlayStation 4 remain strong worldwide. During itslast-reported quarter ended December 31, Sony's gaming divisionincreased sales by 16.8 percent to 531.5 billion yen ($4.4 billion). Thedivision's operating profit hit 27.6 billion yen, jumping 123 percentyear over year.A similar story played out in Music, where Sony's salesand operatingincome rose 13.1 percent and 17 percent, respectively,compared to the same period a year earlier. Sony said Wednesday it has its eyes on the potential in the area of streaming music. Last month, it teamed up with streaming-music leader Spotify for a service called PlayStation Music.On the Devices side, Sony sees a "competitive advantage" in the area of CMOS image sensors. The Devices unit last quarter grewsubstantially, as revenue rose 38.6 percentyear over year to 292.9 billion yen and as a year-agoquarterly operating loss of 23.5 billion yen gave way to 54.5 billion yen profit.Only Sony Pictures was a disappointment in thelast quarter, due in part to massive, destructive and embarrassing hack of the division's computer network in November. Sony also reported earlier this month that thePictures division suffered from lower sales in motion pictures and television production, due to fewer major releases during the period. In general, however, the Pictures business is doing well. Sony said earlierthis month that it expects its Pictures business to post a 54 billionyen profit at the end of this fiscal year.Ultimately, Sony's announcement seems focused on appealing to shareholders who want to see the company (and their investments) continue to grow. In the last year, Sony's shares have risen more than 56 percent, and on Wednesday they closed at $28.02, up 5 percent for the day.Sony did not immediately respond to a request for comment.