TOKYO—Sony Corp. on Wednesday warned of a further decline in image-sensor sales as demand wanes from high-end smartphone makers including Apple Inc., but the company said it would hit its profit target thanks to growth in videogames.

Sony said it was on track for operating profit of more than ¥ 500 billion ($4.9 billion) in the year ending March 2018, which would be higher than the ¥ 300 billion yen it has projected for the current fiscal year ending March 2017.

Presenting an update on the company's midterm business plan, Chief Executive Kazuo Hirai mixed a bullish forecast on the games business and a virtual-reality headset to be sold in October with disappointing news on the sensor business, which he had previously said would become a leading profit generator for the electronics and entertainment conglomerate.

"A revitalized Sony-branded consumer electronics business is expected to provide the foundation for the company's fiscal 2017 targets," Mr. Hirai said.

The slowdown in sales of Apple's iPhone has hit Sony by curbing demand for its sensors, which are used in the phone's camera. Initially, Sony projected the sensor unit would achieve sales of ¥ 1.3 trillion to ¥ 1.5 trillion in the year ending March 2018, but it now expects the figure to be around ¥ 1 trillion or slightly more.

"Management takes this issue very seriously as we have heavily invested in the image-sensor business," Mr. Hirai said.

He said in the short term Sony hopes to shore up the unit's profitability by selling more to handset makers in South Korea and China. In coming years, demand should increase for uses such as surveillance cameras, drones, smart factories and automobiles, he said.

Videogames are a brighter story. Sony's flagship PlayStation 4 videogame console has sold more than 40 million units since its introduction in November 2013, making it the fastest-selling game machine for Sony and surpassing rivals such as Xbox One from Microsoft Corp. and Wii U from Nintendo Co. Membership in its fee-based subscription service, called PlayStation Plus, increased to 20.8 million in March of this year from 10.9 million in January 2015.

Sony said the division, which also handles internet-based services such as the online TV-streaming service PlayStation Vue, would generate revenue between ¥ 1.8 trillion and ¥ 1.9 trillion in the year ending March 2018, up from a previous forecast of ¥ 1.4 trillion to ¥ 1.6 trillion.

Sony shares were up more than 5% in Tokyo trading Wednesday after taking a hit last week from the U.K.'s vote to leave the European Union. Mr. Hirai said he expected to reach the profit target regardless of global economic conditions including possible effects of the U.K. referendum.

The British vote could help Sony because it has triggered a strengthening of the yen against the U.S. dollar. That adds to Sony's profit because the company has expanded outsourcing of manufacturing outside of Japan, where the costs are now lower in yen terms. Sony's projection for the year ending March 2018 assumes that the dollar would trade at ¥ 113, but it is currently at around ¥ 102.

Sony plans to ship 20 million units of the PlayStation 4 during the current fiscal year, with momentum likely to be fueled by releases of blockbuster game titles and a high-end version of the console.

Macquarie Securities analyst Damian Thong said Sony might also introduce a slimmer version of the PlayStation. Sony declined to comment on that possibility. The new variations of the console might be released at a game show in September, Mr. Thong said.

Mr. Hirai was especially optimistic about PlayStation VR, a virtual-reality headset system that it plans to start selling in October. While the device is designed for videogame players, Mr. Hirai said Sony was looking at a variety of virtual-reality applications, taking advantage of its existing businesses in cameras, movies and other areas.

Rivals in virtual reality include Facebook Inc., which sells the Oculus Rift, and HTC Corp.'s Vive. Sony hopes to get an edge by offering its headset at a lower price. PlayStation VR is set to cost $399, while Oculus and Vive cost $599 and $799, respectively.

Elsewhere, Mr. Hirai said Sony would make a comeback in robots for consumers. It was one of the first tech companies to introduce toy robots for consumers with its dog-shaped Aibo, introduced in 1999, but it later dropped the product. Recently, some companies have introduced consumer-oriented robots, such as SoftBank Group Corp.'s Pepper.

Mr. Hirai didn't say when the Sony robot would be released or what specific features it would have, but he said the robot would be "capable of forming an emotional bond with customers" and would "inspire love and affection."

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

 

(END) Dow Jones Newswires

June 29, 2016 03:05 ET (07:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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