Category: Company News

Investors are running for cover after Sony delivered its latest results and guidance: Shares in the Japanese tech giant tumbled 8 percent in Monday trade.

Underlying that one-day move is a concern that the company’s portfolio “is in trouble,” according to one analyst.

The company is in “highly competitive areas with declining unit sales and margin,” Ray Wang, principal analyst and founder at Silicon Valley-based Constellation Research, told CNBC over email.

“They have a bad hand and need to change … their portfolio,” Wang said.

Wang’s comments came on the back of Sony cutting its sales and operating revenue forecast for the fiscal year. In particular, investors are closely watching the firm’s gaming business. That division is the largest contributor to the company’s operating income, comprising more than 30 percent in the first three quarters of Sony’s fiscal year.

The company sold 8.1 million units of its flagship PlayStation 4 (PS4) gaming console in the third quarter, according to its earnings release. That was lower than the same quarter of the previous fiscal year, but “in-line with (the company’s) expectations for this sixth year of the platform,” Sony Chief Financial Officer Hiroki Totoki said at a Friday earnings briefing.

Slowing sales of PS4 hardware and a negative impact from foreign exchange rates outweighed an increase in game software sales to drag down the segment’s operating income as compared to the previous year, according to Totoki.

Following the earnings release, Sony’s shares took their big Monday drop.

“Investors are disappointed with Sony’s declining operating profits at its core gaming division,” said Leo Sun, a tech and consumer goods specialist at The Motley Fool.

Sun said the decline in PS4 hardware sales “wasn’t surprising” given the age of the platform, but “investors likely expected the PS4 Pro, PS4 Slim, and PS VR to give the hardware business a little more juice,” in reference to the different variants of PS4 hardware and its peripheral virtual reality headset.

“It was also disappointing compared to Microsoft’s 9% year-over-year constant currency growth in gaming revenues in its latest quarter,” he said. A constant currency calculation attempts to nullify the impacts of exchange rate fluctuations.

Overall, Constellation Research’s Wang said, Sony’s content — including movies — remains “the brightest spot” and its cameras business “is still growing.”

But, he said, the company still needs “a content, network, and tech strategy in order to create vertically integrated markets.”

Nomura on Friday reduced its target price for Sony’s shares but maintained its “buy” rating on the stock despite the tech giant’s slash in forecasts.

Some of that confidence stems from the company’s efforts to strengthen and position its entertainment business, Nomura analyst Yu Okazaki said in a note.

“We think growth opportunities around imaging technology are abundant in the electronics business. We also take a favorable view of the business platform strategy of supporting investment in growth fields with stable cash flows from consumer hardware,” Okazaki added.

Investors are running for cover after Sony delivered its latest results and guidance: Shares in the Japanese tech giant tumbled 8 percent in Monday trade.

Underlying that one-day move is a concern that the company’s portfolio “is in trouble,” according to one analyst.

The company is in “highly competitive areas with declining unit sales and margin,” Ray Wang, principal analyst and founder at Silicon Valley-based Constellation Research, told CNBC over email.

“They have a bad hand and need to change … their portfolio,” Wang said.

Wang’s comments came on the back of Sony cutting its sales and operating revenue forecast for the fiscal year. In particular, investors are closely watching the firm’s gaming business. That division is the largest contributor to the company’s operating income, comprising more than 30 percent in the first three quarters of Sony’s fiscal year.

The company sold 8.1 million units of its flagship PlayStation 4 (PS4) gaming console in the third quarter, according to its earnings release. That was lower than the same quarter of the previous fiscal year, but “in-line with (the company’s) expectations for this sixth year of the platform,” Sony Chief Financial Officer Hiroki Totoki said at a Friday earnings briefing.

Slowing sales of PS4 hardware and a negative impact from foreign exchange rates outweighed an increase in game software sales to drag down the segment’s operating income as compared to the previous year, according to Totoki.

Following the earnings release, Sony’s stock was sent plummeting around 8 percent on Monday afternoon.

“Investors are disappointed with Sony’s declining operating profits at its core gaming division,” said Leo Sun, a tech and consumer goods specialist at The Motley Fool.

Sun said the decline in PS4 hardware sales “wasn’t surprising” given the age of the platform, but “investors likely expected the PS4 Pro, PS4 Slim, and PS VR to give the hardware business a little more juice,” in reference to the different variants of PS4 hardware and its peripheral virtual reality headset.

“It was also disappointing compared to Microsoft’s 9% year-over-year constant currency growth in gaming revenues in its latest quarter,” he said. A constant currency calculation attempts to nullify the impacts of exchange rate fluctuations.

Overall, Constellation Research’s Wang said, Sony’s content — including movies — remains “the brightest spot” and its cameras business “is still growing.”

But, he said, the company still needs “a content, network, and tech strategy in order to create vertically integrated markets.”

Nomura on Friday reduced its target price for Sony’s shares but maintained its “buy” rating on the stock despite the tech giant’s slash in forecasts.

Some of that confidence stems from the company’s efforts to strengthen and position its entertainment business, Nomura analyst Yu Okazaki said in a note.

“We think growth opportunities around imaging technology are abundant in the electronics business. We also take a favorable view of the business platform strategy of supporting investment in growth fields with stable cash flows from consumer hardware,” Okazaki added.

WeChat is China’s most popular messaging app with a monthly user base of more than 1 billion people.

But it’s unlikely that you would have used it if you live outside China. It is owned by Tencent, one of Asia’s largest companies by market cap. While it started out as a messaging service, it has transformed into an app where you can do everything from payments to hailing a ride, or even booking flights.

It’s a very different prospect to the likes of Facebook‘s Messenger or WhatsApp.

Here’s a rundown of what WeChat is and how it works.

One of the primary uses of WeChat is messaging. Just like WhatsApp, you have a list of conversations that you’re engaged in.

You can add people in a variety of ways.

When people exchange contact details in China, you often see one person scanning the other person’s phone. Each WeChat user has a unique barcode known as a QR code. One person can scan the other user’s QR code to add them to WeChat. You can also use a phone number or ID to add a person and search for people nearby.

WeChat is one of the main ways people communicate in China. Even when doing business, people prefer WeChat to email. It’s even more prevalent because services like Facebook are blocked here.

There is also a social feature called “Moments.” Users can upload a number of images or videos and their friends can comment or like the post.

Two internets could emerge in the next five years — one led by China and one led by the United States — a top venture capitalist has predicted, adding to a growing chorus of voices suggesting such a development could take place.

The concept has been dubbed the “splinternet,” and it refers to a future in which the internet is fragmented, governed by separate regulations and run by different services.

A unified definition is still unclear, but one suggestion is that the future could see Chinese and American apps and services each dominate half of the internet. That concept was the topic of much discussion at the World Economic Forum in Davos, Switzerland, last month.

And while there may be two internets coming, “it will not be China and the rest of the world. It will be China and countries that adopt Chinese apps, and countries that adopt American apps,” Kaifu Lee, the CEO of China-based venture capital firm Sinovation Ventures, told CNBC at Davos.

“While Chinese apps will have a hard time getting adopted in U.S. and Europe and English-speaking countries, I think they’re proving their rapid acceptance in India, Southeast Asia, South America, Middle East and even a little bit in Africa. So I think in five years, if you look at all the people in the world that took their phone and counted how many Chinese apps and American apps, I’d say it would be fifty-fifty,” added Lee, who prior to his current job was the head of China for Google.

Indeed, companies like Alibaba and Tencent are already expanding their services abroad and acquiring or investing in companies across Asia. For example, Alibaba owns a majority stake in Southeast Asian e-commerce firm Lazada, while Tencent has an investment in Indonesian ride-hailing firm Go-Jek. Chinese technology giants are continually looking to spread their tentacles abroad.

Lee is among a number of voices predicting that a so-called splinternet will come into being. Last year, former Google CEO Eric Schmidt said he foresaw a “bifurcation into a Chinese-led internet, and a non-Chinese internet led by America.”

The United States and China are battling for dominance not just when it comes to the internet, but other, interrelated technologies including 5G and artificial intelligence.

AI in particular is a technology that is seen as crucial to supporting future industries and one that will partly shape the way the internet looks in the future. AI is a broad term that encompasses the development of algorithms that are able to adapt and learn, which could boost the automation of many tasks. AI can be applied to many industries globally.

A number of commentators have suggested the U.S. could be behind China in the AI race. That includes Fred Kempe, CEO of U.S. think tank the Atlantic Council, who said in a CNBC op-ed that “China was on track to take the commanding heights of AI and that the consequences could be historic in nature.”

Lee said that right now, the U.S. is stronger in AI research, while China is moving forward with the actual implementation of artificial intelligence technology. But that could change very soon.

“It’s (China) arguably ahead of U.S. in some areas behind in others, maybe neck and neck. But at the current trajectory, China will probably be ahead of U.S. in five years,” Lee said.

“China has more data, more users, more usage per data. And there’s very pro-AI government policies. So these things cause China to be ahead in AI implementation, despite not being ahead in AI research,” he added.

The government of the world’s second-largest economy emphasized the development of AI in its “Made in China 2025” plan — the country’s official blueprint for dominating various areas of technology in the future. And in 2017, China laid out plans which it hopes will make it the world leader in AI by 2030.

Both the U.S. and China have been aggressive in developing AI, and recent findings show a split between the U.S and China when it comes to patent filings.

A study from the U.N. World Intellectual Property Organization (WIPO) published last week found that American firms IBM and Microsoft are the two organizations in the world with the most AI-related patent filings. But among research groups and universities, Chinese organizations hold 17 of the top 20 spots in terms of total patent filings.

Oil prices gave up gains after hitting two-month highs on Monday, as economic slowdown and forecasts for weaker demand offset OPEC-led supply cuts and U.S. sanctions against Venezuela’s petroleum industry.

OPEC and its allies began a new round of supply cuts in January. These curbs, led by Saudi Arabia, have been compounded by involuntary losses that the Venezuelan sanctions could deepen.

Brent crude oil, the global benchmark, hit $63.63 a barrel, the highest since Dec. 7, before turning negative. Brent slipped 39 cents, or about half a percent, to $62.37 around 8:45 a.m. ET (1345 GMT).

U.S. West Texas Intermediate (WTI) futures hit a 2019 high of $55.75, its best intraday price since Nov. 21. WTI was last down 54 cents, or 1 percent, at $54.72.

“You have the sanctions on Venezuela, on top of the reduced supply from Saudi Arabia,” said Olivier Jakob, oil analyst at Petromatrix. “There’s no sign of overhang in the crude oil markets.”

OPEC supply fell in January by the largest amount in two years, a Reuters survey last week found. That offset limited compliance with the output-cutting deal so far by non-OPEC Russia.

The U.S. sanctions on Venezuela will limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran last year, some analysts said after examining details announced by the government.

Underlining the lack of excess supply, Jakob cited a rapidly clearing West African crude market and the structure of Brent crude futures, in which the first-month contract is trading near the price of the second month.

While OPEC and its allies are cutting output, the United States is expanding supply. Nonetheless, figures on Friday showed a drop in the number of U.S. oil rigs to their lowest in eight months, lending prices some support.

“This points to a less pronounced rise in U.S. oil production,” said Carsten Fritsch, analyst at Commerzbank. “The oil market is more or less balanced,” he added, citing the drop in OPEC output to a level close to forecast demand for the group’s crude.

The main drag on prices has been concern about a possible slowdown in demand this year due to a weaker outlook for economic growth and developments such as the U.S.-China trade dispute.

U.S. President Donald Trump last week said he would meet his Chinese counterpart Xi Jinping in the coming weeks to try to settle the dispute, and there are hopes that the two sides will come to an agreement.

WATCH: Here’s what drives the price of oil

Oil hit a two-month high near $64 a barrel as OPEC-led supply cuts and U.S. sanctions against Venezuela’s oil exports brightened the supply outlook, but prices fell back on uncertainty about prospects for the global economy.

OPEC and its allies began a new round of supply cuts in January. These curbs, led by Saudi Arabia, have been compounded by involuntary losses that the Venezuelan sanctions could deepen.

“Oil prices have lacked direction in today’s trading session because of mixed market cues,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

“Insufficient progress made in the US-China trade talks is weighing on prices, although losses are limited by implementation of the OPEC+ deal and concerns surrounding Venezuela’s oil supplies.”

Brent crude oil, the global benchmark, hit $63.63 a barrel, the highest since Dec. 7, before turning negative. Brent slipped 73 cents, or 1.2 percent, to $62.02 around 9:40 a.m. ET (1440 GMT).

U.S. West Texas Intermediate (WTI) futures hit a 2019 high of $55.75, its best intraday price since Nov. 21. WTI was last down $1.11, or 2 percent, at $54.15.

“You have the sanctions on Venezuela, on top of the reduced supply from Saudi Arabia,” said Olivier Jakob, oil analyst at Petromatrix. “There’s no sign of overhang in the crude oil markets.”

OPEC supply fell in January by the largest amount in two years, a Reuters survey last week found. That offset limited compliance with the output-cutting deal so far by non-OPEC Russia.

The U.S. sanctions on Venezuela will limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran last year, some analysts said after examining details announced by the government.

Underlining the lack of excess supply, Jakob cited a rapidly clearing West African crude market and the structure of Brent crude futures, in which the first-month contract is trading near the price of the second month.

While OPEC and its allies are cutting output, the United States is expanding supply. Nonetheless, figures on Friday showed a drop in the number of U.S. oil rigs to their lowest in eight months, lending prices some support.

“This points to a less pronounced rise in U.S. oil production,” said Carsten Fritsch, analyst at Commerzbank. “The oil market is more or less balanced,” he added, citing the drop in OPEC output to a level close to forecast demand for the group’s crude.

The main drag on prices has been concern about a possible slowdown in demand this year due to a weaker outlook for economic growth and developments such as the U.S.-China trade dispute.

U.S. President Donald Trump last week said he would meet his Chinese counterpart Xi Jinping in the coming weeks to try to settle the dispute, and there are hopes that the two sides will come to an agreement.

WATCH: Here’s what drives the price of oil