The fate of Sony Mobile continues to be up in the air. The division, which was supposed to save Sony, has instead turned out to be a liability for the company. Sony once had ambitious plans for the division which would have seen them sell over 50 million devices last year. Sony now believes they’ll sell 39.2 million units for FY14, a 9% reduction year-on-year. Under current CEO, Kaz Hirai, Sony hasn’t been shy about closing divisions that aren’t working, a decision which led them to sell VAIO, their PC division, and reduce their majority stake in Olympus.
While this doesn’t mean immediate doom for mobile, it does mean that the next few years will be a crucial time for the division. While televisions was allowed to suffer a decade of losses, under the new leadership, Sony will likely not be as lenient to mobile. Starting in 2015, Sony has outlined a new three-year strategy that includes FY15, FY16, and FY17 which ends on March 31st, 2018. Sony hopes to use Return on Equity (RoE) as the primary KPI (Key Performance Indicator) as it targets a group RoE of 10% in FY17.
More details on their strategy and comments on mobile after the jump.
Under this new plan, Sony has outlined three parts which they believe will help them achieve profitability. They include
- Focusing on profitability and not volume
- Increased autonomy for each business division with greater emphases on shareholder value
- Defined position of each division within the larger Sony group
As it stands, Sony sees the following divisions as its “growth drivers” which hopefully translates into profits:
- Imaging (primary their CMOS business which powers iPhone)
- PlayStation
- Sony Pictures & Sony Music
From Sony
The TV and Mobile Communications businesses operate in markets characterized by high volatility and challenging competitive landscapes. In view of this business environment, Sony will place the highest priority on curtailing risk and securing profits in its operation of these businesses. Since both markets are experiencing intense cost competition and commoditization, Sony will strive to further increase the added value of its products by leveraging its in-house technologies and component devices. By carefully selecting the territories and product areas it targets, Sony will seek to limit its capital investment and establish a business structure capable of securing stable profits. The Company will also continue to explore potential alliances with other companies in these areas, in response to changes in the business landscape.
That last line, where Sony mentions alliances with other companies, is what’s had Sony fans worried the most – but it’s likely not an area of concern yet. As we inch closer to 2018, the true fate of Sony Mobile will reveal itself. If Sony is able to turn the division around and have it contribute to its growth and profitiblity, there is little reason for them to sell the division, let alone enter into a strategic alliance. However, if the division continues its downward trend or isn’t able to stabilize at its current levels and return profits, its place in the company will likely be rigorously evaluated and, as we’ve seen under Kaz, he’s not afraid to cut divisions that aren’t performing.
Discuss:
Do you think it makes sense for Sony to enter into an alliance with another company for their mobile division?