Sony's earnings reveal not just overall company success but also which departments are struggling.
Unprofitable divisions are more likely to suffer cuts, and may mean unsupported products down the line.
Sony has made a major resurgence in recent years. Following a changing of the guard at the very top of the company, unprofitable divisions have been shuttered or streamlined and its entertainment business has flourished. It’s only because of those changes that the recent drop in net income was stopped when it was. Sony is more resilient than its figures initially let on.
For the second quarter of 2016, Sony’s net income is down nearly 86 percent year over year. Even without knowing the actual numbers, that’s a tangible figure that would raise eyebrows and eyelids of any observer or analyst. It’s not necessarily Sony’s fault, however. As TechCrunch explains, much of this downturn can be laid at the feet of international events like the strong performance of the Japanese yen, or more national ones, like the Kumamoto earthquake.
Ultimately, these events led to Sony posting a net income of just $48 million for the quarter — a stark difference from this time last year, when it earned $336 million. Operating income was also down, but not by such extremes. It fell by a little less than half, to $453 million.
Sony’s restructuring in recent years made the company far more resilient to these exterior factors.
One of the biggest change-ups has been in its mobile space. While this same period last year saw the division sap more than $20 million from Sony’s operating income, this year it contributed $37 million to it.
This is even more impressive when you consider that Sony actually sold just shy of 40 percent less handsets this quarter than the same time last year. This is where the restructuring came into play. Sony refocused its efforts on high-volume devices, killing off midrange handsets and reducing sales in regions that were unprofitable.
Sony also seems to have found profitability in its home entertainment sector. Televisions were one of its biggest loss industries just a few years ago, as it struggled to compete with the likes of Samsung and companies from China. In the second quarter of 2016, this division managed to raise its operating income by 11.4 percent, to $174 million.
These turnarounds were backed up by traditionally strong segments of Sony’s business, such as its game and network services, which includes the PlayStation brand. It contributed $188 million to operating income totals. While this represented a drop of 20.6 percent year over year, Sony attributes much of that to the appreciation of the Japanese yen, as well as reduced pricing on PlayStation hardware.
So while Sony’s finances might not look as strong this quarter, in actuality it’s much sturdier as a company than it was in recent years. Despite international pressure, it has remained in the black.