Today Sony announced that they generated approximately ¥43 billion in profits (about $458 million at current exchange rates) during the 2012 fiscal year. This marks the first year in half-a-decade that Sony hasn’t reported an overall loss. The company is hopeful that this trend will only continue with the impending launch of the PS4.
Sony managed to get back into profitability despite declining sales: the company’s Playstation division saw a 12% drop in revenue, which cost the company about $7.5 billion dollars. Sony blames the loss on declining hardware sales: while sales of PS3 hardware and software have actually improved when compared to last year, the PS3’s gains were negated by the Vita’s continuing poor performance.
Sony was able to recoup the loss and turn a profit thanks to a number of cost-cutting measures proposed by their new CEO, Kaz Hirai. Under Hirai’s management, Sony instituted a number of drastic budget cuts, including the sale of a the company’s Japanese and American office buildings, a cut on executive bonus pay, and thousands of lay-offs. The money saved by these measures was more than enough to compensate for the company’s “deteriorated” (Sony’s words, not mine) sales.
Sony is optimistic that they’ll be able to continue this trend of profitability with the PS4. Speaking with Polygon, Sony CFO Masaru Kato says that Sony isn’t expecting to incur the same amount of losses that they suffered with the PS3’s troubled launch. “Unlike PS3, we are not planning a major loss to be incurred with the launch of PS4,” Kato said. “At the time we developed PS3, we made a lot of in-house investments to develop the chip, the Cell chip. Development of the chip saw the silicon processing and all the facilities invested by us ourselves. But this time, yes we have a team working on chip development, but we already have existing technology to incorporate and also product investment and all the facilities will now be invested by our partners, other foundries, so we don’t have to make all the investment in-house.” Sony expects that sales in 2013 will drastically increase with the introduction of the PS4.
Unfortunately, Sony isn’t as positive about the Vita’s future: while the company plans to sell 10 million PS3’s next year (a reasonable amount, given the system’s age,) Sony predicts that the Vita will only sell 5 million units in the next 12 months. That’s an extremely low amount, and it implies that Sony doesn’t have much confidence in their latest handheld’s long term chances. To put that number in perspective: if Sony thinks that they’ll only sell 5 million Vita’s per year, that would mean that they’re actually projecting their own system to sell at a slower rate than Nintendo’s Wii U (which sold 3.5 million units in six months,) a system whose sales thus far have been considered comically slow and underwhelming.
Regardless of the company’s own pessimistic outlook on the Vita, overall this is probably good news for Sony. Turning a profit — even a profit generated through lay-offs and real estate sales — is better than posting a loss, and by those standards, Sony is already in a healthier position than most of the other major Japanese video game companies, such as Nintendo, Capcom, Square-Enix, and Konami, all of whom have posted some fairly substantial losses for the last fiscal year.