According to the news report by Bloomberg, Sony Corp. saw the biggest drop in its shares in 3.5 years after the company reported a decline in profits and also cut down its revenue guidance.
Sony’s share price fell by a huge 8.1% in trading in Tokyo on Monday, which is the most the stock has fallen since September of 2015.
The company reported that its operating income for its gaming division dropped by 14% to ¥73 billion (~$666 million) in the fourth quarter of 2018. The Tokyo-based technology giant said that it sold 8.1 million PS4 (PlayStation 4) gaming consoles. One year ago, the company had sold 9 million units more.
The PlayStation 4 console, which is now entering its sixth year in the market, is expected to cross the 100-million-unit sales mark by the middle of this year. This milestone will cement its position as one of the biggest selling gaming consoles in history.
Despite this landmark achievement, 2019’s software lineup doesn’t look as impressive as last year. In 2018, the company has debuted massively popular titles such as God of War, Red Dead Redemption 2 and Spider-Man.
For the complete fiscal year of 2019, Sony has kept the guidance for its gaming division at ¥30 billion (~$273 million). Now, the focus is changing to the timing and details of the next generation of gaming consoles from Sony.
Macquarie Group Ltd. analyst Damian Thong said that the strong profits from the gaming software division was impacted by the greater promotional as well as marketing spends the company had to improve PS4 sales volumes. Thong cut his rating of the Japanese company from “Buy” to “Neutral”, and said that their firm was moving to the sidelines until they could assess the risks involved in the gaming segment better.
Nomura Holdings as well as Goldman Sachs Group Inc. reduced their price targets for Sony’s shares.
Asymmetric Advisors Pte.’s analyst Amir Anvarzadeh stated that there would be a bigger downside since his firm believed that the slowing growth in Sony’s gaming division most likely signaled the launch of the next gen PS5 console in the next year as well as the increased costs associated with such a launch.
For total sales for the year, Sony lowered its forecast for the fiscal year through to March from a previous ¥8.7 trillion (~$79.17 billion) to ¥8.5 trillion (~$77.35 billion).
The company stated that weaker demand for its mobile handsets, camera chips and financial services is what led it to cut its guidance for the year. However, the company added that a tax adjustment is expected to boost Sony’s income for the year.
Sony’s operating profit for the last quarter was at ¥377 billion (~$3.43 billion), which was above the analyst expectation of ¥365 billion (~$3.32 billion). After adjustments for a one-time gain in Sony’s music division, the operating profit was actually much lower, coming in at ¥260 billion (~$2.36 billion).
The company’s sales for the fourth quarter dropped by 10% to ¥2.4 trillion (~$21.84 billion). Sony’s mobile division is also struggling, showing operating losses to the tune of ¥15.5 billion (~$141.05 million) for the fourth quarter.
Sony’s earning report is another reflection of the challenges that technology companies are facing the world over. There is an obvious slowing in the demand for their products and services.