Sony’s Loss Widens as Xperia Struggles Against IPhone

By Pavel Alpeyev, Grace Huang and Takashi Amano  

Photographer: Kiyoshi Ota/Bloomberg

Sony’s PlayStation 4 has the lead among the newest generation of game consoles as the... Read More

Sony Corp. (SON1) reported a quarterly loss that was seven times greater than a year earlier as the company loses ground in the smartphone market to Apple Inc. and Chinese rivals.
The net loss widened to 136 billion yen ($1.2 billion) as Sony took a 176 billion yen writedown at the Xperia phone business and cut its phone sales forecast for the second time this year. The company’s shares traded in Germany fell.
Sony is headed for losses of more than 1 trillion yen since 2010, marking the worst five-year stretch in its history, amid competition from Apple and Samsung Electronics Co. Chief Executive Officer Kazuo Hirai, who has yet to meet a goal of making Sony’s television business profitable, must now also turn around a mobile-phone unit that’s failed to gain traction against rivals that
now include Chinese makers.
“The company really needs to take a harder look at the markets where it operates,” Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co. “There is still a chance for them to really take a knife to the smartphone business, slash fixed costs and achieve positive cash flow.”
Sony’s shares traded in Frankfurt fell as much as 4.7 percent, the most in four weeks, after the earnings were announced. The stock has gained 13 percent in Tokyo this year.

Photographer: Noriyuki Aida/Bloomberg

Kazuo Hirai, President and Chief Executive Officer of Sony Corp.

China Woes

The electronics maker today cuts its smartphone sales forecast to 41 million units this fiscal year from 43 million, citing poor performance in China. Sony will end development of models for the market, Chief Financial Officer Kenichiro Yoshida said at a briefing in Tokyo.
The reduced sales outlook raises pressure on Hirai to revise his smartphone strategy after losing out to Apple and Samsung in the market for high-end phones. Chinese manufacturers including Huawei Technologies Co., Lenovo Group Ltd. and Xiaomi Corp. are running away with the mid-range market, offering feature-packed devices for as little as $100.
“They said in September that there is a new mid-term plan for the smartphone business, but no details are available and they certainly haven’t done enough so far,” Yasuo Nakane, an analyst at Deutsche Bank AG in Tokyo, said in a phone interview before the earnings announcement.
Sony’s loss for the quarter ended Sept. 30 compared with a 193 billion yen loss average of three analyst estimates compiled by Bloomberg. Strong demand for the PlayStation 4 video-game console and a rebound at its film unit helped cushion the impact of the mobile-phone writedown, with sales at the games business surging 83 percent from a year earlier.

Falling Behind

The movies “22 Jump Street,”released in June and “The Equalizer,” which hit cinemas last month, have generated $285 million in ticket sales, according to Boxofficemojo.com.
While Sony kept its outlook for a 230 billion yen full-year loss, Panasonic Corp. (6752) today forecast its highest profit in seven years. The Osaka-based electronics rival raised its net income target 25 percent to 175 billion yen, citing demand for solar panels.
In March, Panasonic reported its first full-year profit since 2011 after President Kazuhiro Tsuga halted production of money-losing plasma TVs and stopped offering mobile phones in Europe as part of his strategy of targeting businesses and reducing reliance on consumer goods.
“Sony is a full lap behind Panasonic,” Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co., said in a telephone interview today. “Sony is still trying to stop the bleeding, what happens after that is entirely unclear.”