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Sony Just Posted a 666 Percent Rise in Profit as its Turnaround Plan Takes Hold

by Arjun Kharpal, CNBC / / Source: CNBC.com
A man rides an escalator under a advertisement board of Sony Corp's PlayStation 4 game console at an electronics retailer in Tokyo, Japan, June 23, 2015. REUTERS/Yuya Shino/Files

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Japanese electronics giant Sony posted a 666.5 percent rise in pretax profit for its full fiscal year on Thursday, helped by cost cutting in its smartphone business and the continued popularity of the PlayStation 4.

Income before taxes for the year ending March 31 came in at 304.5 billion yen ($2.81 billion), a big rise from the 39.7 billion yen recorded during the same period last year. Operating profit rose 329.2 percent to 294.2 billion yen, its largest figure since fiscal 2007, according to Reuters.

Losses in Sony's mobile communications business, which has been a cause for concern, narrowed to 61.4 billion yen from 217.6 billion in fiscal 2015. The Japanese firm has been on a drive to increase profitability with its Xperia smartphone range rather than chase market share, a move that appears to be paying off.

"If it means that we're selling less number of phones going out the door. We're fine with that so long as we have a profitable business, and we're really on our way to being profitable in that regard," Kazuo Hira, the chief executive of Sony, told CNBC in February.

Another bright spot for Sony is the gaming division which saw operating income rise 84.3 percent to 88.7 billion yen. In January, the company said that PS4 sales had topped 35 million and in its earnings release, it said an increase in software and hardware sales of the console helped offset the decrease in PlayStation 3 sales.

Its camera business also saw strong profitability which rose 72.7 percent.

Sony's strategy under Hirai has been to focus on its most profitable and high-margin businesses. So some concern will be raised by the 28.6 billion yen loss recorded in its semiconductor and component division, an area that has been key to the company's turnaround plans. The segment recorded an 89 billion yen operating profit in fiscal 2015.

While Sony has managed to post some good numbers, the challenge will be maintaining the momentum, analysts said.

"Sony Mobile has embarked on some aggressive cost reduction over the last 12 months. This has seen it exit markets such as China, India and the U.S. as well as reducing its headcount. Now the business unit has more stable financial position to build on as it looks to driving a return to growth," Ben Wood, chief of research at CCS Insight, told CNBC by email.

"This is a tough challenge in the brutally competitive smartphone market. It seems the starting point will be a focus on the Japanese market given it is now the biggest single contributor to Sony Mobile's revenue. Sony has also accepted that it can't rely on smartphones for future growth and is now pushing into the Internet of Things area in the hope that it can drive new revenue streams. It will need to move quickly given progress already made by giant rivals such as Amazon and Google."

The company said it was unable to give guidance for the fiscal year ending March 31, 2017 because of the earthquake that hit Japan earlier this month causing operations at Sony's main manufacturing site for image sensors and digital cameras to be halted. Activity at the factor is still offline.

Sony said the impact of the earthquake on Sony's outlook will "continue to be evaluated" and it plans to issue a forecast in May 2016.

Read More From CNBC: Sony Sees Less Red Ink, Postpones Outlook Due to Quake

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