Sony Mobile CEO: “We will never ever sell or exit from the current mobile business.”

by: Matthew BensonJuly 7, 2015
2.4K

sony logo mwc 2015 5

For the better part of the current millennium, Sony has been in a perpetual state of financial turmoil. While some core businesses like gaming are safe and secure, fans need only to look at the VAIO brand to feel a twinge of pain. As far as the mobile market goes, the situation has been far less stable, with reports usually indicating a bleak future. Still, there are many around the world who cherish and respect the Sony brand name, and who covet the flagship Xperia Z series for its solid construction and state-of-the-art camera technology. We have weighed in on the situation before, as well as offered various commentaries on the outlook. In a recent interview with Arabian Business, Sony Mobile’s current CEO, Hiroki Totoki, had a chance to sit down and set the story straight.

What was said…

Hiroki-Totoki

Sony Mobile’s CEO gave a very candid interview recently.

Arabian Business

The report is spans quite a number of topics, including details about the background and initial struggles that Totoki faced upon his promotion by Sony CEO Kazuo Hirai. Most importantly however, it contains a very clear answer to the question that endlessly resurfaces in rumors and reports: “Will Sony bow out of the mobile industry?” The answer is essentially, no. More specifically, Totoki explained that, “Smartphones are completely connected to other devices, also connected to people’s lives — deeply. 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.”

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.”

In reading through the interview, the CEO gives a very candid, honest look at just why the world has essentially written off the future of his division. The issue is largely related to the 2014 “write-off of the goodwill of our impairment asset [from] when we bought back [100% of] Ericsson’s share [in 2012].” He notes that “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.” He also cites the sale of the VAIO brand as another cause for concern, adding that it “led people to think that Sony would exit the smartphone business, as well. But the smartphone business is very different from PCs.”

Sony-Smartwatch-Steele-3-9

Does the Sony Smartwarch series still have the capacity to compete with the likes of the LG Watch Urbane or Moto 360?

Also mentioned is the smartwatch segment, where Mr. Totoki explains that “those types of devices, and that side of the industry have become huge…Now we try to develop smart devices that are connected to the smartphone. In the future there will be categories of products that will connect to the network, connect machine to machine, connect machine to human, and connect human to human. That sort of connectivity will expand and we will try to develop even more categories in the future. That’s one major focus for this company. It’s a big future strategy.”

Acknowledging the growing ‘insurrection’ among rival OEMs, the CEO explained that “the smartphone device consists of a battery and a screen and chips. These are the main parts of a smartphone, and people can easily make them now. But it is the user experience that is not the same. Even if the device is the same, the user experience is different. And this is a very important point. People are not buying a smartphone because of the device and the way it looks — they are buying it because of the experience.”

…and what wasn’t.

While the cool, collected confidence that Mr. Totoki seems to exude is certainly a welcome sign of optimism, the challenges that the company faces are quite large, to say the least. While Sony has continued to produce quality hardware that provides excellent value-for-money, the sad reality is that most consumers aren’t using its products. Depending on the region, this may be a result of poor availability (i.e. North America) or else aggressive competition (i.e. China and India). With respect to the U.S. market, take for example the following data:

market-share comScore mobiLens

Not only is Sony absent from the Top 5 OEM listing, but in examining HTC’s marketshare at just 3.8% in February 2015, even were Sony to be #6, the percentage would be arguably a trivial one at best. Still, Sony’s main market is not the USA as evident by the lack of availability of the new Xperia Z3+ (and seemingly all other handsets). The company has decided to release it only on Verizon, and a modified, enhanced version of it no less. Other devices, such as the Xperia M, Xperia T, Xperia E (and so on) are nowhere to be seen leaving more price-conscious customers to gobble up offerings by Huawei, Motorola, or LG. Sony is arguably missing some very big potential here, as its brand name recognition would do wonders against mid-to-low end devices of similar offerings by “lesser” manufacturers.

So what about its home, then? As a Japanese company, Sony should seemingly be doing well in its home territory, yet sales data from December of 2014 indicated that wasn’t the case either:

Apple-Japan-Nov-2014 Counterpoint

The caveat again, however, is market penetration: Sony sells a relatively few number of devices in its home country, and they are essentially all top-tier products. As Japan has the third largest economy in the world, consumers aren’t so actively motivated to seek out entry-level smartphones and thus carriers in the Land of the Rising Sun don’t offer them. While it is quite common to see the Sony logo on smartphones while walking around Tokyo or riding a commuter train, by-and-large the lion’s share of sales go to Apple.

This of course leaves the markets of Europe, Asia, the Middle East, and Africa, where Sony actively releases many lower-end products that don’t see release in the previous two. India, now considered to be the “new China” as far as market potential goes, has an absolutely stunning number of OEMs competing for a piece of the pie, and as can be seen below, Sony is clearly not one of the major ones:

Mobile-Phone-Market-Share-In-India-Q4-2014-IDC IDC Asia

This is not to say Sony’s future is bleak or insurmountable mind you, rather these charts are simply demonstrating the uphill battle the Japanese OEM faces if it seeks to become a major player in the mobile world. It’s worth pointing out, however, that technically speaking Sony doesn’t need to be in the Top 3 listing to be profitable; there is enough money to be made from selling lower-end hardware to millions upon millions of consumers in China, India, Brazil, Indonesia, and others that it can still do well enough as “just another” OEM. The problem thus, is largely relegated to the pride and prejudice with which consumers view and judge the Sony brand from past experiences.

The ‘taboos’

Another issue not mentioned, but which many Sony fans no doubt feel strongly about, is the seemingly disorganized, disconnected manner in which Sony Mobile operates on a global scale. Since the release of Android Lollipop alone, there has been at least one major PR mishap that spurred outrage among Xperia lovers. When a Tweet appeared (see above) on Sony’s official Xperia stream and informed readers that only the Z series devices would be updated to Android 5.0, commentators were furious to say the least. While this proved to be absolutely false, at the end of the day such a damaging Tweet should never have been posted in the first place.

Then of course, there was the removal of the Xperia Z3 from T-Mobile’s line-up only for it to resurface again without warning, but with a price-cut. The Z3+ however, remains totally absent. It’s difficult to say just what was going on here in truth, as T-Mobile might have mistakenly pulled it (though given the time frame it was unavailable this seems unlikely), Sony might have wanted it removed and had a change of heart, etc. The incident did unfortunately, inadvertently imply that the Uncarrier might have been replacing it with the Z3+ and hence some customers were no doubt disappointed when it was relisted.

Don't hate me because I'm beautiful: the Verizon Xperia Z4v has a gorgeous QHD display to offer its potential purchasers. Many Sony fans around the world look on it with immense envy.

Color me bad: the Verizon Xperia Z4v has a gorgeous QHD display to offer its potential purchasers. Those stuck with the “standard” Z3+/Z4 may not be so delighted.

Another questionable PR snafu was this past May when Jonathan Lin, General Manager of Sony Mobile Taiwan, publicly stated the company had no intention of making a QHD smartphone: “At the moment, making the move to 2K technology on 5- to 5.5-inch screens does not seem able to achieve market segmentation, so we have no plans to launch 2K phones [and that it would require] “significant improvements in display quality and digital image processing technology.” While the user benefits of a QHD display may be a topic up for debate, the adamant decision hardly won over any Xperia fans hoping their OEM would make devices on-par with leading competitors. Then, once again, reality proved the admission false as Verizon proceeded to announce the Xperia Z4v which, among several enhancements over the standard Z3+/Z4, includes a QHD display. (We can only guess as to what will pan out with the decision to forgo USB Type-C for the near future.)

Indeed the Z3+/Z4 itself is somewhat of a taboo for Sony, as the company has been on a major PR offensive to explain everything from why it exists period to dealing with the pervasive criticism that the Snapdragon 810 CPU contained inside it causes overheating issues. And then there is the naming issue. The device itself has faced rather sharp criticism from fans and pundits alike due to the perceived shortcomings and questionable nature of its ability to positively affect the company’s bottom line. These stem almost exclusively from its remarkable similarities to the Z3 which came before it. Many fans were expecting something more profound, more unique, and more original, especially amid talk of shifting to a longer release cycle for the Z flagships and the rumors of a truly new flagship device.

On a final note, with respect to the smartwatch market segment, Mr. Totoki was quite eager to mention Sony’s early adoption of the wearable platform, however nothing was said with respect to sales figures. Given that Sony’s offerings are of a decidedly different nature than say, the LG Watch Urbane or even the Moto 360, it remains to be seen just what the next iteration will bring to the table. A lot of developments have happened with Android Wear devices since the launch of the Smartwatch 3, and Sony will need to step up its game if it wants to stand out.

Much to do about something

It’s quite interesting to see what a difference time can make: It seems like only yesterday that Kaz Hirai was waxing poetic about potential alliances in the “highly volatile” mobile business sector and his thoughts on the next three years of business. Said interview prompted more than a few people to start counting down a proverbial “doomsday clock” of sorts until Sony would possibly make such a bold announcement as partnering with another OEM or outright offloading the business unit entirely. And who could forget the talk that started when word spread of the VAIO Corporation’s plans to release a phone and what that might have entailed.

While many of us at Android Authority have shared our thoughts on the decline of Sony Mobile, no one here, or perhaps anywhere for that matter, wants to see Sony fail or falter. The company has produced some of the most iconic, innovative digital devices of the modern age and the world needs it to continue to pave the way forward with new technology and techniques. The recent interview with Sony Mobile’s CEO couldn’t have came at a better time and, while we won’t know for sure what the future holds for the Japanese maker, it’s clear that it has no intention of stepping aside no matter how loud the skeptics are. Here’s to the future.

  • Милен Стефанов

    Strange- I read “We will never ever sell…” but it sounds like “We will sell our mobile division to anyone who give us five dollars, but there is no buyers.”

    • Mike Bastable

      sadly i kinda think you read that right…..i would worry about investing 1 dollar in Sony at the moment…

      • Shamoy Rahman

        Funny how so much propaganda against Xperia still exists today when Xperias already swung back to profit in Q4 2014 and profits have only grown in Q1 and Q2 and Xperia sales have toppled the iPhone 6/6+ in Japan and have captured 25% of Taiwan’s market share.

        • Mike Bastable

          Again kinda agree but tour sales figures are wrong for Japan…

          • Shamoy Rahman
          • Mike Bastable

            Whilst I admire your ignoring of the facts…Japan sales are split along carrier models. Thus iPhone sales are spread across all providers listed as different phones. IPhone outsells all others in Japan…ever been there?I have recently… It is iPhone world!
            The Sony handset listed was a very good promotion from one provider.
            Sony IS successful occasionally in specific regions but, it is a big but, everywhere else they are failing. Taiwan, by the way hates Samsung and it sales aren insignificant, as are Sony’s.
            Wish Sony well but cherry picking articles and ignoring actual units sold does not a Sony revival make…

          • Shamoy Rahman

            What I know as of now is Sony is no longer losing any money from smartphones but they are barely pulling a thin profit margin, time will help them return to success. After all they are Sony, if any other company went under this pressure they would give up and exit. Look at Samsung in 1997, Sony almost drove every single electronics company in the world outside of Japan bankrupt but the only company to never give up was Samsung. Samsung went from billions to nearly bankrupt but did they ever stop? No, they kept struggling and making losses till they became successful. Sony is going under this cycle now but they are still the world’s sixth largest company to get patents granted per year, they are nowhere close to as volatile as any company like Blackberry or Nokia which went boom and bust.

          • Mike Bastable

            Mmmm again kinda agree a little. Nokia never went bust by the way…
            Sony,as a conglomerate, has failed to make ANY profit for years! ANY!, not one Dollar. The mighty have fallen. Mobile sells tons of Camera modules and that probably keeps the whole division afloat.
            I loved Sony in the past it was THE brand…but so was IBM, Levis, Philips, Rover etc…times change. Sony management are awful and need a good kicking.

          • Shamoy Rahman

            I totally agree. The new management by Kazuo Hirai (new CEO) and Kenichiro Yoshida (new CFO) are making huge changes at the company now. Sony recovered in such a way that required billions in losses but they never gave up. They never gave up! That’s the best part. That’s why the Xperia division is growing again in sales and capturing market share. :D

          • Mike Bastable

            they should give you product man!

          • Shamoy Rahman

            If I worked at Sony, I would turn the company into a monster corporation.

          • Mike Bastable

            I agree

  • Jeff Moreira

    Give me a Xperia Play 2 and I will buy it from Sony again.

    • Shamoy Rahman

      They might make it again but who needs an Xperia Play when you can play your PS4/PS3 games on the go with data or wifi on Xperia phones now (you just need an Xperia phone and PS3/PS4 controller).

  • Ambkor

    I am thinking between the new sony xperia z3+ or the compact z3. I am kin of tired of big screens and i want a big battery life. The compact is that… but I kind of want to wait for the sony xperia z4 compact. :/

    • Shamoy Rahman

      Get the Z3, I just purchased it recently and its an AMAZING phone. Z3+ suffers from overheating so don’t buy that and trust me my hands are not that big but the real estate you get from a much larger screen is a better experience. Don’t get the Z3+ no matter what but get the Z3 or Z3 compact (I would recommend Z3).

      • Ambkor

        Well i have a note 3 right now and i am kind of tired of this huge size phone i want something small. My s3 was good enough.

        • Shamoy Rahman

          Well the Z3 is closer to the S3 in size but if you want something that’s as compact as it then go with the Z3 compact but since the Z3 is in between I’m sure you will like it the best.

  • jasonlowr

    Did Sony really bounced back in Japan? Serious question, cause I didn’t get to see it in the news.

  • Dato Alavidze

    In every review all I read is “apple sucks” and stuff like that but it’s still selling the best. I am not a big fan of apple but I know it’s a very impressive brand.

    • Yup. Just like Budweiser. The king of beers. Oh, and Justin Bieber. Both of those things are clearly impressive. Oh, and the twilight movie franchise. That’s why it won so many oscars. Popular things are always the best and very high quality clearly.

  • Svnjay

    Another Sony doom and gloom article from Android Authority?

    • Shamoy Rahman

      Interestingly enough at the end of Q4 2014 Xperia division swung into profit and profits grew even more in Q1 2015 and toppled iPhone sales in Japan and grabbed 25% of Taiwan’s smartphone market share. Now Sony needs to increase its profits and sales even more to be competitive, they just need better marketing now.

  • Kamalnath Kanthimathinathan

    Would they back this up with a real flagship.
    If something comes out this September with the rumored specs, I’ll buy it….

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