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 Hirai said mobile would remain one of the three core divisions of
its electronics business, even though its shrinking footprint and
ballooning losses now threaten the prospects of that flagship
business scoring a profit this year.
Sony, which once chased the third spot in the smartphone market
behind giants Apple Inc and Samsung Electronics Inc has been forced
to scale back its ambitions in the rapidly growing mobile market as
with other consumer electronics.
On Tuesday Sony said it taking a 180 billion yen ($1.7 billion)
impairment charge, writing down goodwill from its buyout of Ericsson
when it made its mobile unit a wholly owned subsidiary.
The Japanese firm widened its net loss forecast to 230 billion yen
($2.15 billion) for the year ending March 31 from a previous
forecast of a 50 billion yen loss, and said it would forego paying a
dividend for the first time since it listed in 1958.
"Whether they cut their forecast four, five or six times it doesn't
really matter. What's more important for the market is whether this
(restructuring) will put an end to their problems as they've said it
will," said Yasuo Sakuma, portfolio manager at Bayview Asset
Management in Tokyo.
Analysts said the news was in line with expectations after Sony
flagged a potential writedown on the mobile unit in July and pegged
it as a piece of a crucial restructuring plan Hirai has promised to
complete this year.
"I will be at the center of making sure that restructuring will be
completed this year and that we will turn a profit in the next
financial year. A recovery is my responsibility," said Hirai. "This
is the first time we've not paid a dividend and we feel that
responsibility as management very heavily."
But the announcement emboldened some critics of Sony's turnaround
strategy and of Hirai, who took his post in 2012 promising to pull
the firm's troubled electronics division into the black by focusing
on its mobile, gaming and imaging units.
"To be honest when you're a listed company there's a limit to what
restructuring and stripping off business units can do. A private
equity firm wouldn't buy a company with these kinds of losses," said
an investment banker who covers the technology sector and has
advised Sony in the past.
While the forecast revision could have been an embarrassment for new
Chief Financial Officer Kenichiro Yoshida, who assumed his post in
April promising the company would be more realistic about its
outlook, analysts said it showed his plans were on track.
"This has shown that a sensible chief financial officer is able to
control the expansionist aspirations of business heads, which, if
unchecked, would lead to larger losses for Sony," said Atul Goyal,
analyst at Jefferies in Singapore.
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On Tuesday Sony also said it expects an operating loss of 40 billion
yen instead of a 140 billion yen profit flagged in July, but held
its target of a 400 billion yen operating profit in the next
business year.
NOT SO SMART
Sony had fallen behind in the rapidly expanding smartphone market,
lagging rivals such as Apple, Samsung and Chinese upstarts such as
Xiaomi, due to its lack of relationships with carriers in the
crucial U.S. and Chinese markets.
The company cut its profit outlook for its mobile business to zero
in July and trimmed its sales forecast for smartphones to 43 million
from 50 million, which would mark a 10 percent increase on the year.
"For now, rather than chasing market share or unit sales we will
identify the market risks and emphasize profitability," Hirai said,
adding that Sony would focus on regions with stronger prospects.
Hirai also said Sony will cut around 1,000 of the 7,100 staff in its
mobile unit during the current business year. The cost of reducing
headcount will be outlined when Sony announces its results for the
July to September quarter at the end of October.
That could push the unit into the red, below a current forecast of
just breaking even and potentially threaten the prospects of its
electronics division scoring a profit this year, a goal Hirai has
said he would achieve at all costs.
Shares of Sony closed down 1.8 percent before the announcement on
Wednesday, versus a 0.5 percent fall in the broader market.
($1 = 107.23 Japanese yen)
(Additional reporting by Teppei Kasai; Editing by Chang-Ran Kim and
Matt Driskill)
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