Sony To Overhaul Smartphone Division, Plans For Profitability In 2015

Today, Sony announced that it will overhaul its smartphone division, which is currently losing the company money. Hiroki Totoki, Sony's new mobile chief, said that the company has been too optimistic about its goal of becoming number three in smartphones. Right now the focus will be on profitability, even if that means losing 20-30 percent market share in smartphones.

“Our urgent task is to make the business profitable even if we face declines in sales by 20% or 30%," said Mr. Totoki, who replaced Kunimasa Suzuki as the new head of the smartphone division.

Under the CEO, Kazuo Hirai, and the new CFO, Kenichiro Yoshida, Sony hopes to refocus the company in three areas: image sensors, video games, and its entertainment studio. Sony has already seen strong growth in video games and consoles division, for which it aims to increase its revenues from ¥1.4 trillion ($12 billion) to ¥1.6 trillion by 2018, as well as in the image sensor division, for which it hopes to grow sales from ¥890 million to ¥1.5 billion. Sony is also expected to see solid gains in sales from its Hollywood studio.

Other divisions from Sony aren't expected to do as well in the next period. Cameras are expected to stay flat or slip to between ¥650 billion to ¥700 billion, compared to ¥710 billion for this year.

Sony didn't give any numbers from its smartphone division. The company has seen some good reviews of its latest flagship smartphones, but most of its other devices are likely getting squeezed from more known brands such as Samsung and Chinese manufacturers as well.

Sony is likely to reduce the number of flagships it releases per year. The company is also facing much fiercer competition at the low end, so it will probably reduce the number of affordable smartphones it sells, too.

The new mobile chief promised that Sony's smartphone division will see profitability in 2015. Sony's sales are quite strong in Europe, Japan and Southeast Asia, which represents between 23 and 34 percent of its sales. The bigger problem is in the US and China, where it gets around 3 percent in sales from each of them. Sony has already announced plans to scale back the investment in China, but it hasn't made a decision about the US market yet.

The company hopes to enter new markets in the future, such as the Internet of Things, where it sees much potential for growth:

"It's hard to imagine devices with telecommunication features will cease to exist," Mr. Totoki said. "We will strengthen our profitability so that we can embark on challenges in new frontiers, even if there would be some risk."

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