Sony Earnings: What to Watch

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Sony Corp. is scheduled to announce its second-quarter earnings after the Tokyo market closes Friday. Here’s what you need to know:

EARNINGS FORECAST: The electronics giant is expected to report a net loss of ¥148.1 billion ($1.36 billion) for the July-September quarter, much wider than the $19.3 billion loss a year earlier, according to a poll of analysts surveyed by Nikkei Quick. Investors have already factored in the hefty expected loss after Sony said in September it planned to write down $180 billion of the value of its smartphone business segment in the quarter through September.

REVENUE FORECAST: Analysts expect ¥1.82 trillion in revenue, up slightly from ¥1.78 trillion a year earlier.

WHAT TO WATCH

PROGRESS IN RESTRUCTURING: Sony has said it would complete its restructuring by March to become profitable from the next business year, and investors are waiting for progress updates. Analysts say they have faith Chief Financial Officer Kenichiro Yoshida’s ability to turn Sony around, but some say the company’s current restructuring plans won’t be enough.

Announcing more drastic measures that result in more restructuring expenses wouldn’t necessarily be negative, as long as Sony is taking steps in the right direction, says Yasuo Nakane, an analyst for Deutsche Securities.

SCALING DOWN MOBILE BUSINESS: Sony is expected to lower its smartphone-sales target by several million units from the 43 million it forecast in July, people familiar with the matter say. Analysts say Sony’s smartphone forecasts have been too optimistic given intensifying competition — not only from Apple AAPL -0.34% and Samsung 005930.SE +4.83%, but also from low-cost Chinese handset makers.

TV RECOVERY: Sony’s TV business has been unprofitable for the past decade, and the company has once again pledged to turn the business around. This fiscal year, analysts say Sony is closer to achieving that goal than in previous years, thanks to strong sales of 4K ultra-high-resolution TV sets. Still, whether the TV business can squeeze out an annual profit depends on its performance in the key October-December quarter, they say.

BRIGHT SPOTS: Sony’s PlayStation videogame business and image sensors for cameras are two of its most promising operations, analysts say. Sony last week announced a new image sensor specifically designed for car cameras. “Sony’s image sensor is at least four years ahead of others,” says Morgan Stanley MUFG Securities analyst Masahiro Ono.

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Through out my years, Sony has been a passion of mine.

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