Sony knows that smartphones are integral parts of modern life and connect to many other consumer electronics and other connected devices, and for that reason alone, it is not going to get out of the smartphone business, according to a senior company executive.
"Smartphones are completely connected to other devices, also connected to people's lives—deeply," Sony Mobile Communications CEO Hiroki Totoki told Arabian Business, a publication based in the United Arab Emirates. "And the opportunity for diversification is huge. We're heading to the IoT (Internet of Things) era and have to produce a number of new categories of products in this world, otherwise we could lose out on a very important business domain."
"In that sense we will never ever sell or exit from the current mobile business," he said.
Totoki has been working to turn around Sony's smartphone business since he replaced Kunimasa Suzuki in the fall of 2014. So far, the results have been middling. According to research firm Gartner, Sony was the No. 10 global smartphone player in 2014, with 37.8 million smartphones sold, figures that were roughly flat compared with 2013. Sony has struggled to gain traction in China and the U.S., the world's two largest smartphone markets.
Totoki has also had to tamp down rumors that Sony might sell or dispose of the mobile business. In February Sony CEO Kazuo Hirai said he would not "rule out considering an exit strategy" for Sony's mobile and TV units. Yet Totoki said it was easy to understand why such speculation gained traction.
"The speculations arose because in 2014 we made a huge loss as a mobile business," he said.
"It mainly came from the write-off of the goodwill of our impairment asset," Totoki added. "When we bought back Ericsson's share [in 2012], we bought back 100 percent of it. And obviously that price was high. We had to write it down and it made a substantial loss for the company. But this was an accounting loss and did not impact our cash flow. Our cash flow is very healthy. But the accounting loss was so huge--that's why people have speculated like this."
Last fall Sony booked impairment charges of around $1.44 billion (¥176 billion) from the mobile business, which helped drag down Sony to an overall net loss. For the current year, the mobile business expects an operating loss of around $319 million, while the company as a whole forecasts an operating profit of $2.6 billion.
Totoki, who has been with Sony for almost 30 years, has cut costs and jobs significantly since coming on board in a bid to restore profitability. "We are trying to decrease our costs by 30 percent to the end of 2016, and reduce our headcount by 20 percent," he said.
Sony confirmed earlier this year it would cut another 1,100 employees from its Mobile Communications business, on top of the 1,000 job cuts it had already announced in that unit. Sony plans to trim the mobile division down to 5,000 employees by March 2016.
"We are trying to streamline the organization as well as our product portfolio to maximize our profitability and improve our ROI," Totoki said. "We have set out our plan already and are just starting to execute it. This year, 2015, is a year of big transformation, and we will try to complete this transformation by the end of the year, and hopefully see an improvement in financial performance in 2016."
Earlier this week Sony made its Xperia Z3+ flagship smartphone available through Amazon's (NASDAQ: AMZN) U.S. website. The unlocked phone is compatible with spectrum bands from AT&T Mobility (NYSE: T) and T-Mobile US (NYSE:TMUS). Verizon Wireless (NYSE: VZ) intends to sell a variant of the phone, called the Z3v, later this summer.
Totoki said Sony Mobile is able to stay ahead in mobile thanks to the innovations in other Sony divisions, including image sensors. "Of course we are using a very good quality of image sensor that our colleagues at Sony created," he said. "That's the craftsmanship in technology that we have to install to provide the best user experience. That sort of craftsmanship in technology is very important--it's key to becoming more than just a mere smartphone. It takes the quality higher, improves the brand image, and the user experience."
- see this Arabian Business article
- see this Xperia Blog article
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