Sony sharply cut its outlook for the current fiscal year, citing the failure to achieve “significant sales growth” as the principal reason for the downwards adjustment.
Sony’s previous forecast from July was negative as well, with a net loss of approximately $465 million estimated for the fiscal year ending on March 31, 2015. At the time, Sony attributed the negative outlook to weaker than anticipated smartphone sales; the company said it was aiming for sales of 43 million, down from 50 million in the previous forecast.
Now Sony announced it would record an “impairment charge” of approximately $1.7 billion from its mobile communications unit, representing the unit’s entire goodwill.
In plain English, Sony realized that its mobile business is not as valuable as it thought and had to book the $1.7 billion loss representing the difference between its estimations and reality.
The impairment charge will be recorded in the second quarter of the year (ending on September 30), and as a result, Sony shareholders will not receive a dividend this fiscal year. It’s the first year in the company’s 56 years history when it doesn’t give out a dividend. The total loss for the year is expected to be a whopping $2.15 billion.
<em>From profit to a $1.7 billion loss</em>
So, what happened exactly to Sony’s mobile biz, which used to be a profit maker? The press release gives us some clues – Sony failed to make the money it was expecting due to “significant change in the market and competitive environment of the mobile business.” Basically, Sony didn’t sell enough phones.
To address the issue, the company will “change the strategy of the Mobile Communications segment in certain geographical areas, concentrate on its premium lineup, and reduce the number of models in its mid-range lineup.”
Hopefully, Sony will manage to turn around its mobile business quickly – the company is doing a lot of things right with its high-end Xperia lineup, which includes the brand new Xperia Z3, Xperia Z3 Compact, and Xperia Z3 Tablet Compact.
At the other end of the spectrum, LG expects record sales this year, while Xiaomi just took first place in the bustling Chinese market and is now aggressively expanding around the world.