Sony Mobile FY16 Forecast – Sales Down 20%, Profitability Up

As is the case with Sony Mobile, with every bit of bad news comes good news. While from the outset, the division has been riddled with loss, Sony has actually been doing a fantastic job of driving Mobile towards sustainability.

Nearly 3 years ago, Sony CEO Kaz Hirai embarked on a mission to steer their mobile arm away from high-volume, low-margin devices (which make up a vast majority of Android vendors) and towards more premium handsets. For Sony, this has translated into devices with much higher ASP (average selling price) which has allowed them to leap frog competitors like HTC and LG. In fact, Sony enjoys ASPs higher than those found at Samsung and is only second to Apple.

 

The downside of this deliberate tactic has been a dramatic reduction in sales for the company and 2016 will be no different. For FY16, Sony is forecasting shipping 20 million Xperia smartphones, down 20% compared to the year where they shipped 25 million units. For context, Apple does that volume every month. So what’s the good news? Probability.

Sony believes they’ll be able to post a profit of ¥5 billion ($45.5 million) in FY16. Though small by all measurements, this does point towards an improving landscape while the results from 2015 was a ¥61 billion ($554 million) loss. It’s worth noting that we’re not talking about revenue here, but actual profits dipping into the black, something Sony Mobile hasn’t been able to do in a very long time.

FY2016 Forecast

 Sales: 16.6% decrease

  • (–) Reduction in mainly mid-range smartphone unit sales reflecting an increased focus on high value-added models
  • (–) Reduction in smartphone unit sales in unprofitable geographical areas where downsizing measures were implemented during FY15

 OI: 66.4 bln yen improvement

  • (+) Improvement in product mix
  • (+) Cost reductions primarily reflecting the benefit of restructuring initiatives
  • (+) Reduction in restructuring charges
  • (–) Decrease in sales

The big question for Sony now is this: If they’re able to hold true to their forecast and post a profit for FY16, how can they, during FY17, build on their gains and begin to increase sales volume while holding onto ASP? As I had written in an earlier piece:

 As unrealistic as it sounds, let’s assume that Sony is able to make 100% profit on each unit sold. If we take their $421.58 ASP as the profit on each device, unless they are able to increase their volume, their profits and revenue will begin to decline as their units sold number slips. 

Discuss:

Do you think Sony can improve their handset volume in 2017?

[Via Sony]