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Sony Reports Soft Q4, Full-Year Earnings as Foreign Exchange and Film Writedown Take Toll

Company boss Kazuo Hirai has been spending time at the studio’s Culver City lot looking for Michael Lynton’s replacement

Sony Corp. CEO Kazuo Hirai has been criss-crossing the Pacific in recent months, making frequent visits to its Culver City, California, lot as the venerable film studio searches for a successor to outgoing Sony Entertainment CEO Michael Lynton. And that’s a priority since a weak fourth quarter — and year — from the company’s studio weighed down its most recent earnings report.

Late Thursday night Los Angeles time, Sony reported revenue of $17 billion and earnings of 19 cents a share for the three months ended March 31, which the company classifies as its fiscal fourth quarter.

For the full year, the Japanese conglomerate hauled in $67.9 billion in revenue — a 6 percent dip from last year — and reported earnings of 51 cents a share — a 52 percent slide. Analysts had estimated the company to report revenue of $17.8 billion and earnings of 17 cents a share.

While Sony attributed much of the revenue shortfall to unfavorable foreign exchange rates, the company also took a $962 million writedown in goodwill in January related to its film division, reducing future profitability estimates — which was the main reason behind its weak full-year earnings per share number.

It wasn’t a banner year for Sony’s movie studio, which placed fifth in market share with 8 percent of the domestic box office gross — its lowest number this millennium — as big-budget tentpoles like “Ghostbusters” failed to live up to expectations. Its pictures division lost $719 million in fiscal 2016 after factoring in the writedown.

Furthermore, Lynton announced in January that he is stepping down to focus on his role as chairman of Snapchat parent Snap Inc., which had its IPO in March. Lynton’s departure came after several other high-level executives left the company, including TV chairman Steve Mosko and Sony Pictures co-chair Amy Pascal, who left shortly after the studio’s computer systems were hacked in late 2014.

Earlier this month, Sony issued guidance saying it expects to report net profits of $620 million for the full year ending March 31, a significant increase over the $222 million it had previously projected.

Sony chalked the upward revision up to expected decreases in amortization of deferred insurance and other financial services costs, as well as lower costs than the company had anticipated in some other segments.

The film slate is also looking as promising as it has in years, with “Spider-Man: Homecoming” set to come out July 7 and Ron Howard’s “The Dark Tower,” based on the Stephen King book series, hitting theaters August 4. And with many of Sony’s other lines of business thriving, its stock is up 15 percent  on the Tokyo Stock Exchange year-to-date.

Games and network services was a particularly strong area for Sony, as revenue jumped 6 percent and operating income soared 53 percent in yen terms. And in 2018, the company is expecting better things, including a 13 percent increase in profits for its pictures division.