Sony sacrifices smartphone sales for profitability

Sony can enjoy greater success as a supplier of smartphone components than a manufacturer in its own right, analysts say.

The Japanese consumer electronics giant on Tuesday detailed a plan that will see it cut the number of smartphone models it manufactures in a bid to boost profitability at its mobile communications business, at the expense of out-and-out sales, the Wall Street Journal reported, citing Hiroki Totoki, who took the helm of the mobile division this month.

Totoki said the company could stomach sales declines of between 20 per cent and 30 per cent in its bid to turn a profit, the newspaper added.

Sony excluded the mobile division from long-term financial targets for its electronics business, predicting only that the mobile business will make an operating loss of JPY204 billion (€1.3 billion/$1.7 billion) in the year to March 31, 2015.

In contrast, the company said its devices segment, which produces smartphone sensors and camera modules, would target an increase in sales from JPY890 billion in the current fiscal year to between JPY1.3 trillion and JPY1.5 trillion in the fiscal year ending March 31, 2018.

Jefferies analyst Atul Goyal told Bloomberg that Sony's smartphone components are highly regarded by manufacturers including Apple and Samsung: more so than the complete smartphones sold to consumers.

Sony is considering the changes to its device making division as part of a broader transformation of its consumer electronics business that will see it focus on its gaming, sensor, and entertainment divisions, the WSJ noted.

The company's long-term goals for its other divisions reflect a similar trend to its mobile communications unit, with growth in operating income margins prioritised over pure sales growth.

Sony's game and network services business is the only other division besides the devices unit where the company is targeting sales growth through to end March 2018. However, all of the company's business units are tipped to increase their margins during that time.

The Japanese company has struggled to gain traction in the smartphone market after buying Ericsson's share of the duo's 50:50 Sony Ericsson device joint venture in 2012, despite producing highly rated devices like the Xperia range.

For more:
- see Sony's financial targets statement
- view this Wall Street Journal report
- read this Bloomberg article

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