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Sony should probably stop making phones

Sony should probably stop making phones


Xperia mobile division drags down the bottom line

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Sony has reported earnings for its 2014 fiscal year along with forecasts for the next, and the numbers don’t give much reason for the company to stick with certain struggling products. Sony made an operating profit of ¥68.5 billion ($571 million) off ¥8.22 trillion ($68.5 billion) revenue in the year ending March 31st 2015, but lost ¥126 billion ($1.05 billion) overall mainly due to various restructuring charges.

Although Sony predicts a 3.8 percent drop in revenue over the next year, it expects to make ¥320 billion in operating profit and ¥140 billion in net profit. But it’s worth looking at where that money will come from. Sony is expecting its Devices division, which includes its successful image sensor unit that produces components for the iPhone and other products, to bring in 16.5 percent more revenue and achieve a 36 percent higher operating profit. The profitable movie business, too, is expected to perform better over the next year. Gaming will be more or less flat as the PlayStation 3 generation winds down and the PS4 accelerates.

Mobile is the only core division Sony expects to lose money this year

The mobile division is another story. It was by far the company's biggest black mark in fiscal 2014, making an operating loss of 217.6 billion yen following a ¥176 billion ($1.47 billion) impairment charge from the smartphone and tablet business, and restructuring costs from the sale of the VAIO PC unit. While things shouldn’t get that bad next year, mobile is still the only core division that Sony is expecting to lose money, forecasting a 7.1 percent slip in revenue and an operating loss of 39 billion yen.

Sony is predicting slipping revenues and falling profits in its camera and home entertainment/audio divisions, but you can make the case for keeping both around; the critically acclaimed Alpha and RX cameras have clear synergy with the market-leading image sensor business, and lines like Walkman and Bravia are important to Sony’s identity and brand. Neither is necessarily harming the company's focus. Mobile, however, doesn't seem like it's going to make a positive impact on the company any time soon, if ever, and the Android-dependent devices have little scope for differentiation. Is Xperia the next VAIO? Don't bet against it.