TOKYO -- What appears to be an economic recovery in Japan -- reflected in Sony’s first annual net profit in five years announced Thursday -- could be little more than a blip. It’s hardly time to pop the champagne and toast Sony’s CEO.
Sony’s apparent turnaround has a lot to do with the company’s aggressive efforts to offload its assets, and less with its key electronics business such as TVs and smartphones, for which Japan’s iconic CE brand has been known for decades. Both TV and smartphones remain in the red.
Meanwhile, as with all other Japanese companies, a weaker yen has contributed to Sony’s latest financial results.
Sony posted a net profit of 93.91 billion yen ($948.5 million) in the January-March quarter, compared with a loss of 255.21 billion yen in the same period a year earlier. Revenue rose 8.3% to 1.733 trillion yen, while it swung to an operating profit of 147.15 billion yen in the quarter.
As for the company’s preliminary consolidated financial results in the fiscal year ended March 31st, 2013, Sony is reporting 230.1 billion yen (US$ 2.4 billion) in operating profits, and 43.0 billion yen (US$ 458 million) in net profits.
In analyzing where exactly Sony’s profits came from, Gerhard Fasol, founder of EuroTechnology, broke it down as follows.
“Sony sold the US headquarters building, sold a headquarter building in Tokyo-Osaki, sold a chemicals division, and sold the investment in the mobile social games company DeNA, sold part of the investment in the (fascinating) cloud-based medical IT company M3 and restated the value of the remaining investment,” he explained. “All these transactions resulted in combined operating profits of US$ 2.6 billion, almost equal to the reported operating profits.”
In sum, “it seems to me that the return to profits was achieved by asset sales and revaluations -- not by selling revolutionary new products,” he added.
SONY: propped up by life-insurance sales, real estate and asset sales
Click on image to enlarge.
Unit: operating income (billion yen)
If you take a look at the chart above provided by EuroTechnology that shows operating profits/loss for Sony’s different divisions, one fact becomes suddenly clear.