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Sony’s mobile business is now small enough to not be losing money

Sony’s mobile business is now small enough to not be losing money


Favorable foreign exchange rates swing Sony Mobile into the black

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After years of struggles from its phone division, Sony has finally figured out how to break even: by shrinking everything dramatically and benefiting from favorable exchange rates. The Japanese company today reports a slender quarterly profit of ¥21.2 billion ($205 million), though the highlight is that its perennially struggling mobile group is now in the black by the slimmest of margins.

At this point last year, Sony was reporting a profit four times larger and was, overall, doing much better than it is today, albeit hamstrung by smartphone losses. The good news now is that, with a ¥400 million ($4 million) profit, Sony’s mobile division is actually accretive to the company’s fortunes. The bad news is that, as Sony explains, "during the current quarter, there was a 4.4 billion yen positive impact from foreign exchange rate fluctuations," meaning that the mobile group’s downsizing was only partially responsible for its improved fortunes.

And what a downsizing it has been. Sony is doing a third less mobile business this year than last — ¥185.9 billion in the last quarter versus ¥280.5 billion a year earlier — and it sold only 3.1 million smartphones in the past three months, down drastically from the previous mark of 7.2 million. 2016 has so far only seen the launch of the wildly overpriced Xperia X, as far as marquee Sony phones are concerned. The much more promising Xperia X Performance has been chronically delayed after its initial announcement at Mobile World Congress in February. At this point, Sony’s closer to the launch of its next flagship phone, which is expected to debut at IFA in early September.

Sony won't ever formally quit the mobile market, but it's quit on many geographies and segments

The question of whether Sony should or should not remain in the smartphone business is fast becoming obsolete. Its current size marks it as a minnow in a market where the leaders are pushing past the milestone of 100 million shipments per year — and in which 40 million iPhone sales in a quarter is seen as a worrying slump. Sony only expects to sell 19 million handsets for the whole of the fiscal 2016.

Elsewhere in the company, the PS4 continues to thrive, with a major bump in software sales and a reduction in hardware costs. The imaging division had its struggles, owing to the Kumamoto earthquakes in April and lower sales of Sony’s still and video cameras. Most worrying, Sony reports a "significant decrease in sales of image sensors," which has been one of the company’s most reliable revenue streams. Sony’s LCD TV sales have somewhat surprisingly increased over the past quarter, though they, along with imaging and the gaming division, have been hampered by a stronger yen. It seems like only Sony’s mobile division benefited from Japan’s more valuable currency, likely due to reduced costs of overseas manufacturing and logistics.

Sony has also seen a "significant decrease in sales in the battery business," which would explain why the company has started negotiations to sell it to Murata by March next year.