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What's going on?
Japanese entertainment giant Sony cut its full-year profit outlook on Friday.
What does this mean?
First, the good news: Sony’s operating profit grew by a better-than-expected 10% last quarter from the same time last year. That was partly thanks to strong results from its movie and music segments, and partly down to a weak yen that meant international profits were worth more when converted back. But Sony’s gaming business was a shambles: the company sold 26% fewer games, and barely sold any more PS5s because it’s still not producing enough of them. No surprises, then, that the segment’s profit was down 37% from the same time last year. Sony slashed its annual profit outlook for the segment by 16% too, potentially because it doesn’t have enough high-profile titles in the works or that – ew – gamers are spending more time outdoors. And since its gaming segment makes up around a quarter of its overall business, the company slashed its overall profit outlook by 4% too.
Why should I care?
Zooming in: Optimism only goes so far.
Sony isn’t giving up on its target of selling 18 million PS5s this financial year, promising to bring shipments forward so there’s plenty to go around by Christmas. But it’s setting its sights lower elsewhere in its business: it cut its revenue forecast for its camera image sensors, as the war and Covid continue to impact shipping, production, and costs. Sony’s not the only one: South Korean giant Samsung Electronics warned late last week that it was adjusting its forecasts almost daily because of all the uncertainty.
Zooming out: An investment in the future.
Some of Sony’s production struggles can be put down to the chip shortage, which is something the US has been dealing with too. That’s why the US government finally passed a long-awaited bill late last week that should boost its chipmaking industry, with around $52 billion in subsidies for production and $200 billion to boost research over the next decade.
Originally posted as part of the Finimize daily email.
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