Sony Corp swung to a quarterly operating profit thanks to strong sales of personal computers and digital cameras and a weaker yen, and it raised its full-year forecast by 2 percent.
The second-quarter results reflected the fact that a year earlier there were heavy costs related to a recall of faulty PC batteries, and also that this time the company had lower marketing expenses in the pictures division and a gain on the sale of land.
The results could support the view among some investors that Sony remains on a recovery track after cutting thousands of jobs and ditching unprofitable businesses to focus on core electronics products such as Cyber-shot digital cameras and Bravia LCD TVs.
Sony's game division continues to lose money, however, as it was forced to sell its PlayStation 3 game console at a loss in a bid to keep up with rival Nintendo Co., which is reshaping the industry with its hot-selling Wii.
It seems that it's making good progress even though problems remain, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. But we don't really know what will happen with the U.S. market and currency rates. There are still some big uncertainties here.
Sony said it expected turmoil in the U.S. subprime mortgage market and higher oil prices would have only a limited impact on retail demand.
Consumer spending may cool down a little amid a slowdown in the housing market and a rise in crude oil prices, Sony Chief Financial Officer Nobuyuki Oneda told a news conference.
But we don't see any need at the moment to revise down our views on our U.S. business substantially.
Sony, which competes with Canon Inc in digital cameras and with Samsung Electronics Co Ltd in flat TVs, raised its forecast for operating profit to 450 billion yen ($3.9 billion) for the year to March 2008 from 440 billion.
The new forecast is above the market consensus of 431.5 billion yen in a Reuters Estimates poll of 21 analysts and represents a more than sixfold jump from a year earlier.
For July-September, Sony's operating profit came to 90.47 billion yen, versus a 20.83 billion yen loss a year earlier.
Net profit soared to 73.72 billion yen from 1.68 billion on sales of 2.08 trillion yen, up 12.3 percent. Both net profit and sales are new records for its second-quarter figures.
Sony, which is battling Nintendo and Microsoft Corp in the global videogame industry, said its game division would aim to break even in the second half following a second quarter operating loss of 97 billion yen.
Sony loaded the PS3 with its cutting-edge technology such as a Blu-ray optical disc recorder, but the advanced functions have driven up the price for buyers and made it more difficult and time-consuming for game creators to develop PS3 software.
Nintendo said earlier its April-September operating profit nearly tripled, and raised its full-year outlook. Microsoft reports quarterly earnings later on Thursday.
On its flat television business, Sony said its liquid crystal display TV operations will likely become profitable in the fiscal second half to March 2008.
I'm afraid our product line-up for the spring was rather weak. But we are launching value-added new models with full high-definition panels, Sony's Oneda said.
We expect the LCD TV business as well as our TV business as a whole to turn profitable in the second half.
Sharp Corp, Sony's rival in the LCD TV market, on Thursday posted a 26 percent slide in July-September operating profit to 36.8 billion yen, hit by start-up costs for its LCD TV plants and tight supplies of materials used to make solar cells.
The result came as no surprise since the company announced its earnings forecast for April-September just three days ago.
Sony shares rose 1.6 percent in the year to Wednesday, outperforming Tokyo's electrical machinery index, which lost 6.5 percent. Prior to the earnings announcement, Sony's stock fell 1.4 percent to 5,110 yen. (Additional reporting by Elaine Lies)