By Thomas Wilson
TOKYO (Reuters) - Shares in Sony Corp (T:6758) soared to a nine-year high on Wednesday after it forecast record earnings that have vindicated its restructuring efforts and raised expectations of sustained momentum in profitability.
Under Chief Executive Kazuo Hirai, the tech and entertainment giant has streamlined unprofitable electronics businesses and capitalized on the spread of smartphones with its image sensors.
Citing robust sales of image sensors as well as high-end TVs, Sony hiked its full-year operating profit outlook to 630 billion yen ($5.5 billion), up 26 percent from an earlier forecast and 7.5 percent higher than an average analyst estimate.
"Image sensors will be used in a wide range of areas, and the market is very large," said Masayuki Otani, chief market analyst at Securities Japan Inc.
"Profitability is increasing, and in the mid- to long-term we expect the stock price to reach its 2007 level of 7,190 yen."
Sony's stock rose as much as 12.4 percent to its highest level since June 2008, becoming the most traded firm by turnover on Tokyo's main board. It finished up 11.4 percent at 4,918 yen, giving it a market capitalization of around $54.6 billion.
The new forecast is 20 percent above its current profit record, set two decades ago when strong sales of consumer electronics dovetailed with the popularity of its first PlayStation games console and its "Men in Black" box-office hit.
To develop new profit drivers, the firm has also boosted investment in artificial intelligence and is expanding its consumer products portfolio.
It unveiled its Xperia Hello! voice-activated communication robot this month and on Wednesday said it was reviving its robotic dog AIBO that went on sale in 1999. It also aims to lead the budding virtual-reality market by drawing on the content portion of its business such as music and film.
Combined with resurgent demand for consumer audio products sparked by the rise of streaming services from Spotify to Apple Inc's (O:AAPL) Apple Music, the focus on cutting-edge technology augurs well for future profits, said Macquarie analyst Damian Thong.
"They should also push into 3D sensors which will be useful for augmented reality and the applications that surround that."
"Great products, plus great brand, delivering great profitability," he added. "It's not rocket science perhaps, but for a long time, Sony seemed to have forgotten this magic formula."