Sony share price up, unveils new mid-term strategy

Sony Corp unveiled on Wednesday a mid-term strategy aimed at boosting earnings over the next three years as the company focuses on entertainment, games and image sensors.

The Tokyo-based company projected to reach an operating profit of ¥500 billion in the fiscal year ending March 31, 2018. The figure compares with an estimate for this year of ¥20 billion of operating profit.

In line with its mid-term plan Sony intends to spin off its video and sound business unit into a stand-alone, wholly owned subsidiary by October, following the split of its television business last year. Sony also said it would proceed with preparations to spin off other business units thereafter.

Since it was spun off the TV business has been performing well and it came close to reporting its first annual profit in ten years.

The company plans to relocate its focus on profit “growth driver” businesses, including music, movies, games and image sensors. Sony is also aiming for a higher return-on-equity of at least 10%, which compares with estimated ROE of -7.4% in 2015.

In order to reach its targets Sony will invest in its image sensors unit to increase output and enhance research and development efforts. For its games, the company aims to expand the user base of PlayStation and its online network. Sony also wants to increase its presence in the online music streaming market.

The companys TV business and struggling smartphone unit were targeted for “volatility management” as both businesses face severe price competition and commoditization. Sonys priority in those segments would be to secure profits by carefully picking targeted areas and products. The company also said it would continue to look for possible alliances for those units.

The company included a third category dubbed “stable profit generators”. Although those businesses, including imaging, video and sound, are not projected to achieve any market growth Sony will launch some new products, such as mirrorless single-lens reflex camera. In those areas the company will focus on generating steady profit and positive cash flow without engaging in large-scale investments.

“The company aims to realize its transformation into a highly profitable enterprise by implementing these key strategies.” Sony said in a statement.

Sony gained 1.58% on Wednesday and closed at ¥3 125 in Tokyo, marking a one-year increase of 78.34%. The company is valued at ¥3.64 trillion.

According to the Financial Times, the 18 analysts offering 12-month price targets for Sony have a median target of ¥3 300, with a high estimate of ¥4 100 and a low estimate of ¥1 750. The median estimate represents a 5.60% increase from the last closing price.