Sony has this morning released its results for the first quarter ended 30 June 2014. Overall, it is a good set of results with an increase in sales of 6 percent to 1.8 trillion Yen. Operating income was up strongly at 69.8 billion Yen, a year-on-year (yoy) increase of 97 percent. However, all is not well when it comes to the Sony Xperia range.
Sales in the mobile division were up by 2 percent on a constant currency basis, but this hid the fact that unit sales declined by 2 percent yoy to 9.4 million units. Operating income was down at 2.7 billion yen, this was partly related to an increase in marketing/R&D expenses to “expand sales channels and broaden the product portfolio“.
More critically, Sony’s mid-range portfolio is just not selling as well as the company expected. So much so, that Sony has lowered the full-year forecast shipments for Xperia devices from 50 million to 43 million, a 14 percent decrease. As well as lowering unit sales, Sony is also reducing marketing/R&D expenses in the full-year. Could this hint at less focus on the mobile side going forward?
Sony had expected its mid-range smartphones “to significantly grow mainly in emerging market countries” – clearly this hasn’t happened. The company has also spoke of “increasingly competitive markets in various areas.”
These issues has led Sony to commence a review of its Mid-Range Plan (“MRP”) for the mobile business. The review is on-going, so we won’t find out the outcome until the next results statement. However, Sony hints that one outcome could be an exit of its mid-range portfolio. See the full statement below:
“In July Sony began a review of its Mid-Range Plan (“MRP”) for the Mobile Communications business. This process is currently on-going, and Sony will continue to evaluate the financial and other consequences of changes, if any, in the MRP or strategic alternatives within the Mobile Communications business, as well as its financial performance. It is possible that the above-described circumstances might result in an impairment charge against various assets, including goodwill, in that reporting segment.”
Clearly, Sony is being affected by phones such as the Motorola Moto G, which has been phenomenally successful. The Moto G has made it very difficult for Sony’s offerings to compete at a higher price point. It’s not only on the spec side though, the fact that the Moto G is delivering very speedy software updates compared to Sony’s phones, makes the Xperia mid-range portfolio less attractive.
Does today’s news from Sony surprise you? What do you think Sony needs to do to compete in the mid-range space more effectively? Do you think Sony should only concentrate on the premium side? We’d love to hear your thoughts below.
Thanks Hoa Vô Khuy?t!