Sony Trims Annual Profit Forecast After Bungie Purchase

Sony trimmed its annual net profit forecast on Friday, partly due to acquisition expenses from the purchase of US game studio Bungie, creator of hits like "Halo" and "Destiny".

The PlayStation maker announced in February it would buy Bungie for $3.6 billion, weeks after rival Microsoft unveiled a landmark pact to acquire "Call of Duty" maker Activision Blizzard.

Microsoft says its massive merger, valued at around $69 billion, will make it the third-largest gaming company by revenue, behind Tencent and Sony -- a major shift in the booming gaming world.

Sony Group now predicts net profit for 2022-23 will total 800 billion yen ($6 billion), down from its previous estimate of 830 billion yen.

Higher-than-expected acquisition expenses are "mainly due to the acquisition of Bungie, Inc. being completed earlier than the assumed timing", it said.

Lower sales of games by non-house developers will likely dent its overall sales figures this financial year, the Japanese conglomerate said, but this would be "partially offset" by a weaker yen.

Favourable exchange rates also boosted Sony's movie segment, chief financial officer Hiroki Totoki told reporters.

Customer traffic at US theatres appears to be returning to pre-pandemic levels, and Sony Pictures is looking to score another box-office win after the runaway success of "Spider-Man: No Way Home".

"We have high hopes for 'Bullet Train' featuring Brad Pitt," Totoki said.

In the April to June quarter, Sony posted a three percent year-on-year rise in net profit to 218 billion yen, with sales up around two percent to 2.3 trillion yen.

The company has faced challenges rolling out its PlayStation 5 console, which remains difficult to get hold of more than 18 months since its launch, in part due to pandemic supply-chain disruption and the global chip shortage.

Sony sold 11.5 million PS5s last year, and Totoki said the company would maintain its annual sales target of 18 million, while hinting it could make more consoles if Covid-19 lockdowns in China ease further.

"We would like to consider accelerating production and sales (of PS5s) so we can ship many products in time for the year-end shopping season," he said.

For the PS5, "the problem is more about supply than demand," Hideki Yasuda, senior analyst at Toyo Securities, told AFP before the earnings release.

A US economic slowdown could open up shipping opportunities, even though it poses broader risks for businesses like Sony, Yasuda added.

In the first quarter of this financial year, Sony sold 2.4 million PS5 units -- similar to the same period last year when it sold 2.3 million.

Amir Anvarzadeh of Asymmetric Advisors said Sony could see more "disappointing earnings ahead" despite the tailwind of the weaker yen.

The gaming sector "looks to be where it expects much of the weakness to come from", he said.

"Although they may blame weaker PS5 sales growth... the real reason looks to be higher development costs the firm has assumed through its aggressive acquisition of game developers, namely Bungie" as Sony tries to keep up with Microsoft's purchases of game studios "to score first-party titles".