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Sony reports $35 million net profit for first quarter

August 01, 2013|By Daniel Miller
  • Sony Corp. headquarters in Tokyo.
Sony Corp. headquarters in Tokyo. (TOSHIFUMI KITAMURA / AFP/Getty…)

Sony Corp. reported net income of $35 million for the fiscal first quarter ending June 30, buoyed by an improvement in its mobile products division and the depreciation of the yen.

The Tokyo consumer electronics and media giant lost $312 million in the same quarter a year ago.

Sony, maker of the popular PlayStation series of video game consoles and Xperia smartphones, posted net income per share of 3 cents, an improvement from a net loss of 31 cents per share a year earlier.

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Revenue was up 13% to $17.3 billion, an improvement Sony largely attributed to favorable foreign exchange rates. A weaker yen helps the company because profits become enlarged when foreign currency -- like the U.S. dollar -- is returned to Japan and converted to local coin.

Sony's mobile products division posted operating income of $60 million, a significant improvement from an operating loss of $356 million a year earlier. The company attributed the turnaround to an increase in the sale of smartphones.

The company released earnings just days after activist investor Daniel Loeb, the chief executive of hedge fund Third Point, sharply criticized Sony's entertainment group in a July 29 letter to investors in his company.

The entertainment arm, Sony Entertainment Inc., includes film and television studio Sony Pictures Entertainment, Sony/ATV Music Publishing and Sony Music Entertainment.

Sony Pictures posted operating income of $38 million. The division recorded an operating loss of $62 million a year earlier.

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The company said the improvement was largely due to the sale of Sony Pictures' music publishing catalog. While Sony incurred lower theatrical marketing expenses than a year earlier, it was hurt by lower theatrical revenues -- at least in part due to the disappointing performance of the Will Smith film "After Earth." The sci-fi picture has grossed $242 million worldwide.

In ratcheting up the rhetoric in his call for Sony to make an initial public stock offering of up to 20% of its entertainment arm, Loeb said that part of the company "remains poorly managed."

Loeb's Third Point owns about 7% of Sony. He began calling for the spinoff in May.

He also used the letter as a platform to criticize Sony President and Chief Executive Kazuo Hirai for giving "free passes" to Sony Pictures' Chairman and Chief Executive Michael Lynton and co-Chairman Amy Pascal.

Loeb labeled "After Earth" and another underperforming Sony Pictures release -- the Channing Tatum vehicle "White House Down" -- "2013's versions of 'Waterworld' and 'Ishtar' back-to-back," referencing two of the most famous flops of all-time.

Loeb said that Lynton and Pascal were "responsible for these debacles," and castigated Hirai for comments the executive made at July's Allen & Co. conference in Sun Valley, Idaho. Loeb quoted Hirai saying, "I don't worry about the Entertainment business, it's doing just fine."

"Unfortunately, Mr. Hirai’s remark is consistent with accounts we have heard repeatedly from key industry players and others: under Mr. Lynton and Ms. Pascal’s leadership, Entertainment’s culture is characterized by a complete lack of accountability and poor financial controls," Loeb said.

A Sony spokesman said in a statement on July 29 that the company was reviewing the Loeb proposal.

Japan's Nikkei newspaper reported Wednesday that Sony's board is expected to reject Loeb's proposal.

“The Sony board and management continues to review the Third Point proposal, and we have no comment on this report,” said Sony spokesman Jim Kennedy in a statement.


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Daniel Miller

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