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Sony's smartphone losses are canceling out its PS4 wins

Selling PlayStation games, camera sensors, and insurance is proving a lot more profitable for Sony than selling phones

Sony's rapidly shrinking mobile division has put a damper on the company's latest quarterly earnings, which show great improvement in sales of imaging sensors and PS4 games plus a healthy bump in operating profit. Comparing the last three months of Sony's performance to the previous year, the company's gaming division was up 12.1 percent, pulling in ¥288.6 billion ($2.33bn), while its mobile communications unit slumped by 16.3 percent, recording ¥280.5bn ($2.27bn) in revenue. While evidently still important to Sony's bottom line, the phone business has now been surpassed by sales of PlayStation consoles and games, and may soon fall behind the company's imaging division as well. The Device segment of Sony's earnings, which includes camera sensors, grew by 35.1 percent and produced ¥237.9bn ($1.92bn) in revenue.

Sony will soon be making more money from camera sensors than it does from phones

The one unalterable trend to Sony's fortunes in recent years has been a steady decline in the income it generates from Sony-branded products. Sony camera sensors are among the best in the world, and they feature in Apple's iPhones, Samsung's Galaxy devices, and a great many others, but most of their users aren't aware that they're using Sony technology. At the same time, Sony's financial services group keeps growing, with a 13.1 percent improvement on the previous year and ¥279.4bn in revenue. More importantly, however, operating income from Sony's seemingly out-of-place insurance business is a robust ¥46 billion, which together with the ¥19.5bn from games and ¥30.3bn from components forms the majority of Sony's overall ¥96.9 billion ($784 million) operating income for the quarter. The total number would have been greater if it weren't for the mobile division, which lost ¥22.9bn.

Smartphone sales aren't just decreasing, they're costing Sony money. The company has already said it will refocus around a smaller set of more profitable devices, and part of that new strategy is showing in it having sold 16 percent fewer phones during the quarter. This may still pay off in the long run, but for now, the only benefit Sony is seeing is a reduction in the marketing costs necessary to promote a smaller portfolio of handsets.