Sony’s quarterly loss grows on mobile woes

31 Oct 2014 | Author: | No comments yet »

How Sony wins while losing in the smartphone market.

TOKYO — Sony’s losses ballooned to 136 billion yen ($1.2 billion) last quarter as the Japanese electronics and entertainment company’s troubled mobile phone division reported huge red ink. Sony Corp. posted a smaller than expected second-quarter operating loss on Friday, hailed by its finance chief as proof that the Japanese group’s restructuring program is paying off.Sony has reported a huge second-quarter loss after writing down the value of its mobile handsets business in the face of margin-slashing competition from China.

The Tokyo-based maker of the PlayStation 4 video game machines, Spider-Man movies and Xperia smartphones had reported a 19.6 billion yen loss for the same July-September period a year earlier. The company said the reduced operating loss was due in part to rising sales of image sensors to smartphone manufacturers, though the poor showing from its own Xperia phones weighed heavily on results.

The boost, Sony said, is due to significant growth in Game & Network Services (G&NS) sales—specifically the PS4, which topped 10 million in worldwide sales as of August. The result — unexpected after Sony took an impairment charge of 176 billion yen (Dh5.79 billion, $1.58 billion) on its mobile division — indicates the restructuring announced in May by Chief Financial Officer Kenichiro Yoshida is beginning to bear fruit. The poor result released Friday was despite a 7 percent increase in quarterly sales to 1.9 trillion yen ($17.3 billion) as performance improved in cameras, TVs and game businesses. But the reported loss was slightly lower than analysts had forecast and Sony shares, buoyed by the soaring Tokyo stock market, closed 1 per cent higher. Sony’s operating loss reached 85.6 billion yen in July-September, compared with the 164.3 billion yen average estimate of 3 analysts polled by Thomson Reuters.

Sony countered the mobiles gloom by upping forecasts for its much stronger gaming division, where growth has been driven by the success of its PlayStation 4 console. Yoshida said on Friday that Sony would shrink its exposure to the Chinese smartphone market, where more nimble, fast-growing rivals have dented his company’s hopes of making any significant progress in the world’s biggest smartphone market. It shifted 3.3 million consoles in the three months and upped its revenue projection for the division for the full year from 10 billion yen to 35 billion yen.

Sony will quit the development and sale of China-only handsets, Yoshida said, with an accompanying cut in its smartphone sales forecast to 41 million from 43 million, against sales of 39 million last year. “Restructuring is progressing well and right now we think we will be able to cut 20 per cent of staff at our distribution companies and 30 per cent at headquarters.” It also wound back its operating loss forecast by 28 billion yen. In the quarter that ended on Sept. 30, the handset division lost 172 billion yen ($1.54 billion), compared to an operating income of 8.8 billion yen during the same time last year.

Sony Pictures had a poor quarter with a lack of blockbuster releases although it had good DVD and TV licensing revenues from older films such as Spider-Man 2. Sony’s newest device, the Sony Xperia Z3v for Verizon (above) , earned top marks from PCMag, but the firm has struggled to compete against smartphone behemoths like Apple and Samsung, which has had its own struggles of late. Incoming mobile division chief Hiroki Totoki, picked by Chief Executive Kazuo Hirai to turn around the ailing unit after earning his stripes at a Sony Internet subsidiary and Sony Bank, said he would focus on improving the speed of management response to changes in the market after assuming his new post on Nov. 16. “Sony’s got the will to continue with its smartphone business and it’s hoping income from the business improves. Todoki has reformed businesses before, so he’s probably thinking of rebuilding it,” said Hideyuki Fukunaga, the chief executive of fund manager Investrust.

As of Nov. 16, current senior vice president of corporate planning, finance, and new business, Hiroki Totoki, will replace Kunimasa Suzuki as the new president of Sony Mobile Communications. Sony has lost money in six of the seven past years, struggling amid intense competition from Apple Inc. of the U.S., Samsung Electronics Co. of South Korea and a host of other cheaper Asian rivals. It has repeatedly promised turnarounds but failed to deliver, partly because even if one part of its sprawling business empire recovers, another area usually falters. Under an overhaul announced earlier this year, Sony sold its Vaio computer business and is splitting off its TV division to run as a wholly-owned subsidiary. Meanwhile, its entertainment segment (comprised of motion pictures, television productions, and media networks) is struggling amidst lower theatrical revenues.

That’s a stunning reversal of fortune for the inventors of the 1979 Walkman portable player, which once symbolized the power of Japanese industry to innovate. While screenwriter Aaron Sorkin confirmed Christian Bale’s selection as the late Apple co-founder, new reports tip funnyman Seth Rogen as his right-hand-man, Steve Wozniak.

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