Erosion of margins due to lockdowns, production halts and procurement struggles have resulted in a decline in Sony's sentiments in the first quarter (Q1) of 2020 ended 31 March, says GlobalData, a leading data and analytics company.
According to GlobalData's Filing Analytics Platform, Sony's earnings transcript sentiment score declined by more than 50% in Q1 2020 compared to the fourth (Q4) quarter of 2019.
Sony's sentiments were hit due to net income decline, supply chain disruptions, and store closures. In Q1 2020, the company's revenue fell by more than 25% compared to the previous quarter, while net income plunged by more than 90%.
Margins were affected due to revenue drops in the gaming, music, and electronics product segments. Interestingly, during the quarter, the gaming segment was affected by a decline in Playstation4 (PS4) hardware and game software sales despite COVID-19 lockdowns causing a surge in gaming. The company faced supply chain issues for PS4 components during the quarter. Yet, its inventory was able to meet the short-term demand. According to Sony, the lack of new titles also caused slump in the gaming segment.
Rinaldo Pereira, Senior Analyst at GlobalData, says: 'Rising competition has forced Sony to be innovative in the gaming industry by developing Playstation5. Despite facing challenges from the contagion, the company expects to launch its next-gen console by the 2020 holiday season.'
Component shortages also affected Sony's consumer electronics business. Lower inventories forced the company to shut down its factories in mid-March 2020. Currently, the factories have resumed partial operations but are unable to meet the overall demand. The company also expects more losses in the electronics segment during the year.
The music segment was also drastically affected by lockdown driven impact on recording and licensing activities, CD sales, ticketing, and merchandising revenues. Sony has seen a minimal impact of the COVID-19 on the US music segment due to moderately imposed lockdowns. In Germany and Japan, stringent lockdowns caused greater slump in the music segment.
Pereira concludes: 'Volatile exchange rates affected Sony's gaming and electronics segments. However, its healthy balance sheet will help it stay strong during the rest of 2020, as the management emphasized on strategic investments and acquisitions.'