Welcome to the Sony Corporation conference call for overseas investors for the fiscal year ended March 31, 2016. My name is John, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I would now turn the call over to your host, Justin Hill.

Good morning, good afternoon, and good evening. Thank you all for joining us today April 28, 2016, for a discussion of Sony's results for the fiscal year ended March 31, 2016. We hope you enjoyed our hold music, songs from the Arc of Life by Yo-Yo Ma and Kathryn Stott. I am Justin Hill, General Manager of Investor Relations at Sony Corporation. Tonight, here in Tokyo, I am joined by Kenichiro Yoshida, Executive Deputy President and CFO of Sony Corporation; Kazuhiko Takeda, Corporate Executive, Corporate Planning & Control and Accounting; Atsuko Murakami, Vice President, Senior General Manager, Finance Department; and Steven Kober, Executive Vice President and CFO, Sony Corporation of America. In just a few moments, Yoshida-san will make some short remarks. Then Takeda-san will provide you an explanation of our results and forecast. After that, we will take your questions. Please be aware that during the following remarks and Q&A, statements made with respect to Sony's current plans, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony. These statements are based on management's assumptions in light of the information currently available to it. And therefore, you should not place undue reliance on them. Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accessed by visiting www.sony.net/ir. Let me remind you that a webcast replay of the investor meeting, which we held earlier today, along with the slides presented at that meeting and our detailed earnings release, are available on our website for your access. From this quarter, we have also made available on the website a written translation of the speech Yoshida-san made in Japanese at that investor meeting earlier today. I will now turn things over to Yoshida-san.

Thank you, Justin. Today, I want to speak for a few minutes about 3 topics: first is the impact of the earthquakes in Kumamoto; second is the reason why we have not issued forecast for our 5 Electronics segments today; third is a summary of our corporate results for the fiscal year ended March 31, 2016. After that, Takeda-san explains the results and forecast for our business segment. First, let me say that we extend our deepest sympathies to all those affected by the earthquakes in Kumamoto and Oita; also, some of Sony's employees and their families living in evacuation centers. We have confirmed the safety of everyone. Sony has 4 semiconductor manufacturing facilities in Kyusyu. Immediately following the earthquakes, we temporarily suspended operations at 3 of them, but we quickly restarted production at 2 of the 3. Currently, 1 of the 4 facilities has yet to restart operations: Kumamoto Technology Center or Kumamoto TEC. Kumamoto TEC is extremely close to the epicenter of the largest -- the earthquake that happened on April 16. It is a primary manufacturing site for image sensors for digital cameras and security cameras as well as for the micro displays that go into projectors. Kumamoto TEC has a bilayer structure with clean rooms in each layer. The clean rooms in the lower layer contain our wafer processing equipment, and the clean rooms in the upper layer contain our testing equipment, camera module production equipment and other equipment. The clean rooms in the lower layer and the production equipment inside these clean rooms have not obtained significant damage. Since yesterday, we have begun to start up the equipment in those clean rooms, and we expect to resume production in these rooms around the end of May. On the other hand, the upper layer clean rooms…

Thank you, Yoshida-san. First is the Mobile Communications segment. During fiscal year '15, segment sales decreased 20% year-on-year, and operating loss was JPY 61.4 billion. Compared to the previous fiscal year, operating loss decreased JPY 156.1 billion. Our restructuring efforts have exceeded the target we initially set, and we were able to reduce our operating expenses in fiscal year '15 by approximately JPY 80 billion compared with fiscal year '14. Headcount at Sony Mobile has decreased from approximately 7,100 people as of October 2014 to approximately 4,500 people as of April 2016. Looking forward to fiscal year '16, our target is to record a profit. A portion of the image sensors used in our smartphones and a portion of camera modules used in our smartphones are made at Kumamoto TEC. And there is a possibility that the status of these production lines might have an adverse impact on the results of this business. Next is the Game & Network Services segment. Both sales and operating income of the segment significantly increased year-on-year due to the strong momentum of PS4. Operating income was JPY 88.7 billion. Also, network sales increased by more than 50% year-on-year. In fiscal year '16, we expect the strong momentum of PS4 to continue. However, due to the impact of the earthquakes, there is a possibility that the supply of components from certain vendors might be affected. But even with that impact, at this point in time, we think that in fiscal year '16, we can exceed the 17.7 million units of PS4 hardware that we sold in the previous fiscal year. Currently, we are considering a variety of ways to minimize the impact of the earthquake on the results of this business. Next is the Imaging Products & Solutions segment. In fiscal year '15, sales decreased,…

Thank you very much, Yoshida-san and Takeda-san. I'm now going to turn things over to John so we can begin the Q&A session. John, would you please queue up the questions?

[Operator Instructions] And our first question is from Larry Haverty from GAMCO.

Could you -- just for purposes of clarification, the impairment charges were, I gathered the way the accounting works, included in the operating income. Could you perhaps give us a total in yen of how much the various impairment charges were last year?

Yes. Thank you for asking. Total impairment charge included in operating income in last fiscal year was JPY 90 billion. That consists of battery business and the camera module business. Thank you.

Okay. Now the -- and then in the Game business, the Network Services, the revenue was up 50% last year. This business is -- I understand that you spend a lot of money on servers, and then you collect the revenues over time. So there's a very high incremental margin on incremental revenue. Are we in this business still at the period where the capital spending has peaked? And are we looking at revenue growth anywhere near that? Or is the business so good that we're going to have to have more CapEx in order to service the future demands?

Just to confirm, Larry, you're asking if we've gotten to the point where revenue growth is exceeding the amount of investment in the business?

Yes. That's correct.

Well, I appreciate the question. As for the capital spending for the Network Services business, that will not -- in proportion to the sales growth. So the portion of the capital investments compared to the growth, we see reduced in the future.

And we have a question from John Litschke from TIAA.

Yes. Just a quick question on CMOS. You mentioned that orders are strong. Can you provide any more details on -- if that's primarily for smartphone across the board? And Kumamoto TEC doesn't seem to have much impact to the smartphone supply chain for CMOS. So if some of these orders are related to smartphones, just wondering, are you seeing any concerns there, any cancellations or your market positioning in that space? Any risks there?

So John, just to confirm, you're interested in how are -- if we can provide any additional orders -- excuse me, any additional color on the orders that we've been getting for our imaging sensors in the smartphone space and then what the impact of the Kumamoto TEC suspension in operations is having on -- did you say smartphones in particular?

Yes. I don't think Kumamoto really has much impact, but wanted to confirm that and your positioning in the market if that's intact.

Thanks for the question. As you may know, Kumamoto factory is mainly for the image sensors for audio-visual use like digital, security cameras. And so the major supply chains of the smartphone image sensors are in Nagasaki as well as Yamagata. So we have no negative impact from the current suspension of Kumamoto TEC. Thank you.

Can you comment on the order situation? You mentioned that orders were strong and you're expecting a second half full recovery.

As for the -- yes. Currently, we are getting good orders from the customers and smartphone manufacturers in China. But at the same time, last year, as you may know, we lost some major customers because -- due to the supply constraint. So for the first half, acquisition of new customer and those last customer have actually offset first half of the fiscal year. So thus far, we are saying that we can see the expansion of sales in earnest in the second half of fiscal year. Thank you.

Okay. And on the Games space, you know there's lot of anticipation for virtual reality offering there. I believe you've opened up the preorders in the U.S. Can you talk about any of the initial interest in the PS VR, maybe what the retail channel is thinking? I know it's still early in the year. And then as far as your preparations in the supply chains for production of the product, how is that going? And if demand is extremely strong, are you worried about any supply limitations?

So John, that was 2 questions. I think the first one was on the status of preorders for VR. And the second was about our supply chain for VR, if we anticipate any kind of limitations on our ability to supply the market.

That's right.

Well, as for preorder reaction, I have seen [ph] quite positive reaction in United States. However, the quantity is quite limited. So anyway, that is not a big number. As for the supply chain constraint, there's no significant supply chain constraint. However, we are currently running a not right [ph] number of VR units this fiscal year because this is the year of the start-up of the VR scheduled for our customers. So anyway, there's no big negative supply chain constraint. Thank you.

Okay. And my last question, if I may, is about the guidances withheld. Can we talk about the Pictures segment? Could you provide a little bit more granular update on the subsegments, how those are each going, TV, networks and films?

This is Steve Kober. Let me respond to that question. As we have told you over the last year, we're -- we've changed management in the Motion Picture division. So last fiscal year and in this upcoming fiscal year, we're rebuilding our Motion Picture slate. On the positive side, television had another excellent year. As you can see from the results, that continues to do very well. It's also very strong in the fourth quarter. So that's doing well. In Media Networks, we have a lot of channels all over the world. India is the biggest market, and that continues to do well. And we expect growth next year in the Media Networks business as well.

[Operator Instructions] And I'll now turn the call back over to Justin for any final remarks.

Thanks very much, John. I think we're out of questions, so we're going to end the call here. Thank you all for participating. And I encourage you to call the Investor Relations offices in Tokyo, London and New York if you have any follow-up questions. Thank you very much. Good night.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.