Sony comments on mid-range Xperia review: Focus on profitability over scale

by XB on 5th August 2014

in News

Sony-logoFollowing the news last week that Sony was conducting an internal review into its mid-range Xperia business, we have some comments below from management reflecting on the decision and what it means for Sony’s future strategy in mobile.

Sony intends to review the number of mid-range of handsets it offers. This has been something that has been clear to many of us for a while – Sony offers too many handsets in the low/mid-range that do not differentiate against the competition. The company also plans to focus on profitability over scale, this probably means we will see a concentration on the premium segment going forward.

Check out the full quotes below, taken from various management including Kenichiro Yoshida (Group CFO), Steven E. Kober (CFO of Sony Corporation of America), Hiroki Totoki (Senior Vice President of Business Strategy) and Dennis van Schie, SVP Sales & Marketing at Sony Mobile.

On the recent results within the mobile segment

“The Mobile Communications segment recorded a JPY 2.7 billion loss in the quarter, primarily because an increase in marketing and R&D expenses did not yield the expected increase in unit sales primarily in our midrange. For the full year, we have lowered our forecast from 50 million units to 43 million units. However, going forward, we are going to continue to pursue cost reductions in order to offset the impact of this revision as much as possible.”

Number of Xperia models to be reviewed; focus on profitability over scale

“Going forward, we will deploy country-specific strategies, maintain strong relationships with carriers and strengthen our position as a premium brand, all in an effort to build a profitable business model. We have already began to review our product line-up and the number of models in our portfolio. We will also prioritize profitability over scale so as to reduce the risk associated with this business.”

Mobile will remain a core part of Sony’s business going forward…

“Mobile business is one of three key business parts within the Electronics business. Mobile is absolutely part of the core business of Electronics. One reason is that smartphones have absorbed many functions of Sony’s product line-up, including camera, Walkmans and part games. So we have to deal within the smartphone business anyway.”

…although that could change at any time

“But what is within the core Electronics business is a strategy issue. And the strategy may change in accordance with a change in business environment. So in the future, we may change this current strategy or the definition of a core business. If that will occur, the timing will be at the next corporate strategy meeting scheduled in May next year.”

On the United States push

“We do still have a plan to expand into the U.S. market in an incremental way. We are currently feeding our ability to collaborate with our other divisions such as the Game division. U.S. telecom carriers want to enhance their data ARPU. So what we are trying to provide is streaming music as well as the streaming game functions, combined with the Xperia smartphones. In such a way, we will try to approach the telecom carriers in the United States.”

Future mobile strategy

“As for the strategy of the Mobile business, we will reduce a portion of the middle-range product line and concentrate on the profitable countries and telecom carriers, such as we do in Japan. Originally, the Sony Xperia smartphone began as a high end or flagship product. This is the year that we started to expand our product range to the middle end. During the course of reviewing this mid-term problem, we will re-evaluate the product line strategy. Maybe we will focus more on the high-end side.”

How Sony plans to succeed

“To succeed, we will make sure that we stay lean and fit to deliver on our promise to excite our consumers with innovative mobile experiences and stunning high quality devices, while also driving further sales by ensuring our mid-range portfolio delivers great Sony experiences to wider audiences in this highly competitive segment. The market is changing for sure. But we are more committed than ever to success and believe we are very well positioned to adapt and adjust to that change.”

Via Sony Mobile Blog and Seeking Alpha.

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