Sony says bracing for smartphone slowdown after sensor sales dip

TOKYO (Reuters) - Sony Corp, widely regarded as a key supplier of image sensors for Apple Inc's iPhones, said on Friday it was bracing for a slowdown in the premium smartphone market after sales of its sensors fell in the third quarter.

Videogame sales and cost cuts in Sony's flagging mobile unit pushed October-December operating profit up 11 percent, beating analyst estimates, but the firm confirmed a much-feared hit to a segment that in recent quarters helped it shake off years of losses.

"Demand for image sensors from certain customers has slowed since November due to a slowdown in the high-end smartphone market," Chief Financial Officer Kenichiro Yoshida told reporters at a briefing, without naming the clients.

Worries about weaker iPhone sales and a slowdown in China's smartphone market - the world's biggest - have weighed on Sony shares in recent weeks. The stock closed up 6.1 percent ahead of earnings, still down around 16 percent since the start of 2016.

Yoshida said Sony was planning its budget for the next year assuming a fall in global demand for high-end smartphones.

Sony also said October-December sales of devices, including image sensors, fell 13 percent from a year earlier. The segment, also hit by weak battery sales, booked a loss of 11.7 billion yen compared with a 53.8 billion yen profit in the year prior.

In addition to image sensors, Sony has depended on cost cuts and strong sales of PlayStation 4 games to improve its bottom line over the past year.

The two factors helped its fiscal third-quarter operating profit rise 11 percent from a year earlier to 202.1 billion yen ($1.68 billion), beating the average 175 billion yen forecast of 8 analysts according to Thomson Reuters data.

It said quarterly sales of its game and network services division rose 11 percent, helped by strong holiday sales of PlayStation 4 videogames. It raised its full-year forecast for the division to an operating profit of 85 billion yen from an October forecast of 80 billion.

In mobile, sales fell 15 percent in a division struggling to compete with Apple and Samsung Electronics Co Ltd, as well as low-cost Asian rivals. But operating income more than doubled to 24 billion yen as Sony cut spending on marketing and development and gave up its pursuit of market share.

The company maintained its outlook for full-year operating profit to grow to 320 billion yen from 68.5 billion in the previous year.

($1 = 120.5500 yen)

(Reporting by Makiko Yamazaki; Writing by Ritsuko Ando; Editing by Christopher Cushing and Mark Potter)