Sony counts cost of smartphone failures with £1.3bn projected loss

Sony will not pay a dividend for the first time in its 56-year history as a public company after it warned that troubles at its smartphone division would push it into an annual loss of more than ¥230bn (£1.3bn). The Japanese electronics company is now forecasting a deep loss in the financial year to March 2015, compared to a forecast of a ¥40bn operating profit. “This is the first time we’ve not paid a dividend, and we feel that responsibility as management very heavily,” the chief executive, Kazuo Hirai, said, adding that Sony would aim to restart dividends as soon as possible.

Hirai said Sony had aimed to expand the mobile division but was now revising its strategy. He said Sony would cut 15% of the staff in its mobile unit in the current fiscal year. In July, Sony had cut its forecast smartphone sales from 50m to 43m, barely changing from the 42m it shipped in the year up to April 2014. Hirai insisted that the mobile division remain one of its core electronics businesses, along with gaming and cameras. Sony says it will now focus on fewer geographical regions and the premium end of the smartphone business.

The writedown comes after Sony looked at its performance in the fiercely competitive smartphone market. Apple and Samsung dominate revenues and profits, and smaller players, including Sony, LG, and HTC, are coming under pressure from Chinese vendors such as Huawei, ZTE, and Xiaomi. Hirai said Sony had not managed to stay ahead of changes in the industry. “The Chinese smartphone manufacturers have made great strides and are expanding outside their market, which has caused a shift in the pricing,” he said. “Meanwhile, Apple and other manufacturers are launching strong, innovative products. The changes are very rapid and dramatic.”

Francisco Jeronimo, the smartphone analyst at IDC, said it would be unwise for Sony to withdraw from the US. However, it is one of its weakest markets in sales terms because it needs to sell other products and services there. “They have a solid relationship with mobile carriers in Europe and have been performing well,” said Jeronimo. “But these writedowns show that making money at the high end is possible, maybe only for Apple and Samsung.” The two companies dominate the phone segment costing more than £360, though the average price of smartphones is falling worldwide as cheap phones take off in countries such as India and China.



The cut in forecasts is the sixth under Hirai, who took his post in 2012 promising to pull the firm’s troubled electronics division into the black by focusing on its mobile, gaming, and camera units, selling off its PC business, and shifting the TV business into a subsidiary company. The forecast revision is also an embarrassment for the new chief financial officer, Kenichiro Yoshida, who assumed his post on 1 April, promising Sony would be more realistic about its outlook.

Yoshida had warned in July that Sony could write down losses on its mobile unit for this business year. At the time, Sony cut its profit outlook for its smartphone business to zero but stuck to its full-year forecast. Sales of Sony’s high-end Xperia mobile devices have been hit by a lack of relationships with carriers in the crucial US market, where its smartphones are only available on fourth-ranked carrier T-Mobile US, as well as in China, where local makers remain dominant.