Sony Corporation released its fiscal second quarter results earlier today (three months to end of September 2018), and while overall results are sound, its mobile division continues to disappoint. Quite frankly, it was a terrible quarter for Sony Mobile. The business only managed to ship 1.6 million Xperia smartphones during the quarter – the lowest ever for Sony – with shipments down by over half compared to the same period last year.
Once again, Sony Mobile has lowered its full-year shipment expectations – the third consecutive downgrade, and now expects to ship only 7 million smartphones during this fiscal year. Again, this is half versus what it shipped in the last fiscal year. Sony says that the main volume decline has been led by lower sales in Europe.
It has been painful watching Sony Mobile’s performance quarter-on-quarter. We’ve said for some time, that alienating its core fan base over questionable design choices was never a good idea. A departure of a design that stood on its own against the sea of ubiquitous smartphones was the first misstep, removing the headphone jack was another – although Sony isn’t the only one guilty of the latter.
This was a point conceded by Sony’s CFO, Hiroki Totoki: "The competition is fierce and our products have not been attractive enough."
From the sounds of Sony’s comments, it appears that management must have considered what they do with mobile – and whether they keep the business running at all. Sony’s management team went on to say that "after intense discussion regarding the future of this business, we concluded that it is necessary to further reduce scale in order to reduce business risk."
Reducing scale to us means that it will be closing more regions. Japan and Europe has been the focus, but we wouldn’t rule out that Europe remains safe in the future. Sony could retrench back to Japan only, the way things are going. Sony Mobile plans to reduce operating costs by 50% by 31 March 2021, as it makes "even more significant reductions quicker than planned."
To do this, Sony says it will "improve product appeal" and "proactively leverage the
technology and business infrastructure of our branded hardware business", but that these efforts will "take time". Overall, it expects these efforts to enable the business to turn a profit in its fiscal year 2020.
Where do you think it has gone wrong for Sony’s smartphone efforts? What do you think it needs to do to get back on track? We’d love to hear your thoughts below.
Thanks Adi and Diogo!
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