“What?” I hear you ask, “How could Sony sell fewer phones but make more money?” Those of you that read our Flashbacks and Forecasts piece on Sony would know that Sony – like most other OEMs right now – is having its smartphone division carried by other business units. While Samsung Mobile is relying on Samsung’s component business and LG Mobile needs LG Display and LG Chem to make ends meet, Sony Mobile is being propped up by the Playstation 4 and Sony Financial Services.
But it’s not just the PS4 keeping Sony Mobile afloat. The smartphone division has been relying on the solid performance of Sony Music, Sony Pictures, Sony Electronics and Sony Financial Services for quite some time. Sony may have just posted its biggest annual profit margin in almost a decade – with net profit up 666% and operating profit up 330% – but Sony Mobile has continued to be a drain on the company’s wider fortunes.
Sony has been working on an aggressive restructuring and profitability plan for mobile, but its success is far from assured. The Xperia X range – the line which replaces the long standing Xperia Z series – took a few people by surprise recently when it’s UK pricing was announced. No doubt part of Sony’s “enhanced profitability” strategy, the Xperia X attracted a £499 price tag, despite being a distinctly mid-range offering with a Full HD display and Snapdragon 650 chipset.
Sony has made a “strategic decision not to pursue scale in order to improve profitability”, but slapping a ridiculously high price tag on a mid-range phone means the company is unlikely to ship the stock it already has on hand. In 2015, mobile sales dropped by 20% and look set to continue declining, with the division posting a half-billion dollar loss in 2015.
At this point it seems unlikely that Sony can turn its mobile fortunes around. Sony president Kazuo Hirai has given Sony Mobile a foreboding ultimatum: return to profitability by the end of 2016 or face the consequences. Considering Sony sold off its less-than-profitable computer business years ago, if things don’t take a magical mobile upswing soon, we may not see a Sony flagship next year. Sadly, that would only further improve the Sony Group’s profit margin.
What do you think will happen to Sony Mobile? Should Sony sell its mobile division?