Sony forecasts lower gaming business sales amid memory price surge
Sony's Financial Outlook and Market Challenges
(Corrects first paragraph to show gaming sales forecast to fall to 4.42 trillion yen, not 265.7 billion yen)
By Sam Nussey
Gaming Sales Forecast and Contributing Factors
TOKYO, May 8 (Reuters) - Sony on Friday forecast annual sales at its gaming business would fall 6% to 4.42 trillion yen ($28 billion) due to lower hardware sales as its PlayStation 5 ages and as the industry grapples with a surge in memory chip prices.
Profit Expectations and Software Sales
The Japanese company said it expects gaming profits to rise 30% due to higher first-party software sales and the absence of an impairment loss it recorded a year earlier.
Market Sentiment and AI Impact
Sony has received plaudits for its transformation into an entertainment powerhouse, but market concern about the impact of artificial intelligence on its business and a perceived lack of growth catalysts have weighed on its shares in recent months.
Share Buyback and Stock Performance
Sony said it would spend up to 500 billion yen buying back up to 230 million shares. The group's shares pared losses and were up 2% in Tokyo.
Industry-Wide Concerns
Investors are also fretting about the impact of a memory-chip price surge and disruption to supply chains from the Iran war on margins at electronics manufacturers including Sony and peer Nintendo, which also reports on Friday.
PS5 Hardware Sales and Memory Prices
PS5 hardware sales are based on the amount of memory Sony can secure at "reasonable prices", with hardware profitability expected to be similar to a year earlier.
The firm said it sold 1.5 million PS5 consoles in the fourth quarter, a 46% drop on the same period a year earlier.
Price Increases and Upcoming Game Releases
In March, Sony announced it would increase prices of the PS5, including a $100 bump in the United States, for the second time in less than a year.
Its platform is expected to receive a major boost from the launch of Take-Two Interactive's delayed "Grand Theft Auto VI", which is scheduled for release in November.
"I am more optimistic than Sony and think the market is underestimating the impact of 'GTA VI'," said Serkan Toto, founder of the Kantan Games consultancy.
Memory Supply and Competitor Impact
Sony said in February it has secured the minimum quantity of memory needed to manage the year-end shopping season. Nintendo said that month the chip-price surge was not significantly impacting earnings but could pressure profitability if it persists over the long term.
"Sony's bottom line stands to benefit significantly from the high-margin software sales and ecosystem engagement this launch should trigger," Amir Anvarzadeh of Asymmetric Advisors wrote in a note.
Performance Across Other Business Units
Sony also said it sees higher profits at its pictures and chips units but lower profits at its music business.
The group reported operating profit for the year ended March rose 13.4% to 1.45 trillion yen, below an LSEG consensus estimate of 1.56 trillion yen.
Other Ventures and Global Expansion
While Sony's growing businesses include anime, which is finding a global audience, the company has abandoned plans to launch electric vehicles with automaker Honda.
($1 = 156.8100 yen)
(Reporting by Sam Nussey; Editing by Muralikumar Anantharaman, Sonali Paul and Kate Mayberry)
