Sony's games arm revenue booms by 64 percent with PS4 sales

Sony's games division recorded sales and operating revenue of 441.8 billion yen ($4.35 billion) for the quarter ending Dec. 31, 2013 (PDF), according to its latest financial results, a 64.6 percent year-on-year increase primarily due to the launch of the PlayStation 4 in major markets.

While Sony notes that favorable exchange rates also contributed to the sales and operating revenue increase, it reports  that the results were partially offset by a "significant decrease" in PlayStation 3 sales.

The games sector also reports an operating income of 18 billion yen ($172 million) for the quarter, a 13.4 billion yen increase on the same quarter last year, attributed to an increase in PS4 sales and favorable exchange rates. However, the results were partially offset with the costs associated with manufacturing the next-generation console. The operating income for the quarter included a 6.2 billion yen ($59 million) write-off of "certain PC titles sold by Sony Online Entertainment." SOE announced last month that development on four of its MMOs will cease: Free Realms, Star Wars: Clone Wars Adventures, Vanguard: Saga of Heroes and Wizardry Online.

President and group CEO Andrew House revealed last September that Sony Computer Entertainment expects to ship 5 million PlayStation 4 units by the end of its current fiscal year and 15 million PS3 and PS4 units combined. During the fiscal earnings call today, Sony said that while the PS4 is performing better than expected, the projected 15 million combined sales figure remains unchanged. This is attributed to the low sales of the PS3, Sony said, possibly due to the PS4 eating into its marketshare.

PS4 initially launched in North America on Nov. 15, in Europe on Nov. 29 and select Asian markets in December. It will launch in Japan on Feb. 22. Sony sold more than 1 million consoles on launch day, and, as of Dec. 28, cumulative PS4 sales reached 4.2 million units since its release.

Overall, Sony Corp. reports 2.41 trillion yen in sales and operating revenue ($22.99 billion), a 23.9 percent year-on-year increase over the same period last year. The corporation states that this is largely due to the launch of the PS4 as well as strong smartphone sales and favorable currency shifts. The company recorded an operating income of 90.3 billion yen ($860 million) for the period, an increase of 43.9 billion over the same quarter last year.

The corporation reported 5.9 trillion yen in operating revenue ($56.2 billion) for the nine months ended Dec. 31, 2013 to make it a 16.4 percent year-on-year increase. Sony again attributes the strong results to the launch of the PS4 and significant smartphone sales; however, they are offset by poor performance in the IP&S sector.

Projected operating income for the financial year is 80 billion yen, a 52.9 percent decrease from its October forecast; however, its game division is expected to exceed initial projections. The game division's sales for the financial year are expected to increase and operating costs are expected to decline, year-on-year.

Sony Corp. forecasts a 110 billion yen ($1.1 billion) annual net loss for fiscal year ending March 31, down from its October projection of a 30 billion yen profit. In attempt to trim costs, 5,000 positions will be cut globally across its TV and PC departments, with 3,500 of that figure consisting of overseas jobs. Sony plans to sell its PC business Vaio and will spin off its TV division into a separate company by July. With the restructuring, which is expected to cost 70 billion yen (77.5 billion yen for the previous year), Sony hopes to achieve a return of the electronics business by next year. Full details about the restructuring will be outlined during the full year financial results call.

For the quarter ending Sept. 31, 2013, Sony's game sector recorded an operating loss of 800 million yen ($8 million) which it attributed to the price reduction of the PlayStation Vita and unfavorable impact of exchange rates. It had also reported a decrease in sales for PlayStation 2 and PlayStation Portable for the same period, offset by an increase in PlayStation 3 sales.