Sony to scale back smartphone ambitions and focus on components

Sony is reducing the number of its smartphone models to boost profits in its mobile unit. The Japanese company acknowledges it has lost substantial ground to Samsung Electronics, Apple (NASDAQ: AAPL), Xiaomi, Lenovo and other market leaders.

"We're not aiming for size or market share but better profits," Hiroki Totoki, the recently appointed chief of Sony Mobile Communications, told an investors' conference, according to Reuters.

"Our urgent task is to make the business profitable even if we face declines in sales by 20 percent or 30 percent," Totoki said, according to the Wall Street Journal. Totoki took over from Kunimasa Suzuki in late October, shortly after the company said it would book an impairment charge on the mobile business of around $1.5 billion (¥176 billion).

At the time, Sony said it expected to ship 41 million smartphones in its current fiscal year, which ends at the end of March 2015. That figure was down from forecast of 43 million units in July, a number that itself had been slashed from a 50 million unit forecast in April.  

As recently as March 2013, Sony was optimistic that it could grow to become the world's No. 3 smartphone player behind Samsung and Apple. However, despite praise for its high-end Xperia models, the company has failed to gain traction in China and the United States, the two largest smartphone markets, and has been outpaced by nimbler rivals like Xiaomi.

Totoki admitted that the company's previous goal had been too optimistic, according to the Journal. He said the company is focused on profit and retaining its existing mobile business and being part of continued mobile and consumer electronics technology developments.

To that end, Sony is stopping development of new smartphone models in China. However, the company is looking to get more sales from its so-called devices unit, which produces sensors, camera modules and memory storage. The company hopes it can become a larger supplier of high-end camera modules and other components for other smartphone players.  

Sony expects revenue in that division will rise from $11 billion to $12.7 billion (¥1.3 trillion to ¥1.5 trillion) in the year ending March 2018, compared with a forecast of $7.55 billion (¥890 billion) for the current fiscal year.

"Devices is a perfect example of a successful enterprise-oriented business," Jefferies analyst Atul Goyal told Bloomberg. "Sony's technological advantages are truly appreciated by their customers, be that Apple, Samsung or Chinese smartphone makers, more than by the end consumers of final products under their own brand."

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

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