TOKYO (Reuters) - Sony Corp on Thursday said it does not plan to sell its pictures business after suffering a $1 billion writedown, and instead aims to turn it around by adding sales channels and making more use of movie characters.

FILE PHOTO - A reception staff walks under a logo of Sony Corp at its headquarters in Tokyo February 4, 2015. REUTERS/Yuya Shino/File Photo

“We believe in long-term upside potential for pictures,” Chief Financial Officer Kenichiro Yoshida said at an earnings briefing, reiterating that Sony continues to regard the business as important to the group.

The pictures writedown, brought about by a shrinking market for movies on disc, prompted Sony to cut 11 percent off the group’s full-year operating profit outlook to 240 billion yen.

The cut could have been more severe were it not for a weaker yen and Chinese smartphone makers’ strong demand for Sony’s image sensors - itself a business only just recovering from earthquake damage.

Sony’s semiconductor division, which makes the sensors, is now likely to lose only 19 billion yen on an operating basis this financial year, rather than the 53 billion yen previously forecast. Even so, fluctuation in the smartphone market means Sony has to maintain a cautious stance, Yoshida said.

SHORT-TERM HURT

The pictures division, which also includes media networks and television programs, underpinned Sony’s earnings while its core consumer electronics business struggled against low-cost Asian rivals.

Such was the profitability of pictures that activist shareholder Daniel Loeb urged Sony in 2013 to partially spin off the division so it could pump cash into reviving the electronics business.

Sony did sell some pictures assets, and the electronics business has since returned to profit. Its movie studio, however, now trails rivals in box office share and hit films.

Pictures’ current struggle “partly stems from Sony’s focus on short-term profit over many years,” Yoshida said.

Citing the sale of rights to Spider-Man merchandise and a Latin American TV channel in fiscal 2011, a number of short-term measures at the cost of long-term profit and cash flow reduced pictures’ profitability, he said.

That business, which currently accounts for some 10 percent of Sony’s overall sales, can recover through expansion in growing markets such as China as well as by bolstering sales of merchandise after films are released, Yoshida said.

Chief Executive Officer Kazuo Hirai is currently taking on a larger role in pictures, notably at Sony Entertainment where he is seeking a successor to resigning CEO Michael Lynton.