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Delay of 'The Last of Us' sequel drives Sony's FY'20 sales outlook down

A delay to the sequel to one of its most successful video games was the main factor behind Sony Corp.'s lowered revenue guidance for fiscal 2019, CFO Hikori Totoki said Oct. 30.

Earlier on Oct. 30, the company posted a profit for the fiscal third quarter that beat analysts' estimates and raised its full year net income forecast, but lowered its revenue expectations due to lower-than-expected sales in the game and network services segment.

On an earnings call with analysts, Totoki said the company postponed the launch of "The Last of Us II" from February 2020 to May 2020 because the studio found that the game's quality had not yet reached "the fully satisfactory level" and would require further time for "polishing up."

"The Last of Us," which was developed by the Naughty Dog studio and published by Sony in 2013 to widespread critical acclaim, had sold more than 17 million copies by 2018, making it one of the most successful PlayStation titles in recent years.

Sony plans to cut various costs, including marketing expenses, to a level below that of fiscal 2019 as it anticipates sales to decrease. However, total operating expenses are expected to rise due to an increase in development costs for the next-generation console PlayStation 5, which will be launched in "the year-end selling season of 2020."

Sony's strongest-performing segment for the quarter was its image and sensing solutions, or I&SS, arm. The unit grew sales 22% to ¥310.72 billion and operating income 28.5% to ¥76.38 billion, driven by increased unit sales of image sensors for mobile devices and improvement in product mix.

Sony in September rejected activist investor Third Point LLC's proposal to spin off the I&SS segment, prompting the hedge fund to criticize the company for inaction. The electronics retailer will invest ¥100 billion to build a new factory for the unit, with plans to begin operations by the start of the fiscal year beginning April 2021.

Sony raised the segment's production capacity target for the end of March 2021 to 138,000 wafers per month from 130,000 wafers per month. Totoki said that the proportion of wafers produced internally will increase, adding that the expansion will mainly be in smartphones given the increased adoption of multi-sensor cameras and larger-sized sensors by smartphone makers.

The CFO added that the previously announced closure of its live TV subscription service, PlayStation Vue, on Jan. 30, 2020, will have a minimal impact on the current fiscal year's results.

"Mainly due to the diversification of viewing styles and in anticipation of the competition among pay-TV services, we do not expect the operating environment for the business to improve going forward," Totoki said.

As of Oct. 30, US$1 was equivalent to ¥108.88.