By Takashi Mochizuki
TOKYO -- Sony Corp. reported better-than-expected quarterly profit thanks to strong demand for its smartphone camera sensors, a result that may invite further pressure from activist investor Daniel Loeb to spin off the unit.
Sony said Wednesday its net profit during the July-September period rose 9% from a year ago to Yen188 billion ($1.7 billion), beating analyst expectations.
The image-sensor business, which supplies Apple Inc. and other smartphone makers, recorded an operating profit of Yen76 billion on Yen311 billion in revenue -- both quarterly records for the unit.
Sony didn't mention the iPhone 11 by name, but the Apple smartphone lineup introduced in September likely drove Sony's strong sensor performance. Other iPhone suppliers, such as display maker Japan Display Inc., have said demand for the new iPhone models has exceeded their expectations.
Sony's customers have been adding more cameras -- and thus more sensors -- to their handsets to offer more camera functions, a trend Sony believes is likely to continue.
Activist hedge fund Third Point LLC, led by investor Daniel Loeb, has been calling on Sony to spin off the image-sensor business. Third Point has described the business as a crown jewel that isn't properly valued by investors because it is lumped in with other Sony businesses such as life insurance and television sets that have less growth potential.
Sony recently said it had no intention of spinning off the sensor business, which it said had synergies with other Sony products such as movies and videogames.
Mr. Loeb said he was disappointed with Sony's decision. Hiroki Totoki, Sony's financial chief, declined to comment on the issue Wednesday but said that "constructive discussion is always welcome."
Sony said it expected to sell more image sensors in the year ending March 2020 than it projected three months ago.
"Our factories have been operating at full capacity, and we expect demand will remain strong even after April next year," Mr. Totoki said.
The biggest forecast downgrade came at the PlayStation unit, which now expects operating profit of Yen240 billion in the year to March 2020, down Yen40 billion from the projection made in July.
Sony now expects to sell fewer PlayStation 4 consoles and software during the current fiscal year -- 13.5 million consoles instead of 15 million as previously forecast. As part of cost-management efforts at the unit, Sony said Tuesday in the U.S. that it was shutting down the PlayStation Vue internet TV service next year.
Mr. Totoki said he was confident Sony's PlayStation 5, due to go on sale in late 2020, would be successful against competition from new game-streaming services.
Atul Goyal, an analyst at Jefferies, said he expected the PlayStation 4 to keep selling after the introduction of the PlayStation 5 because Sony is likely to cut the price of the older machine.
Write to Takashi Mochizuki at firstname.lastname@example.org