Sony Investor Day – Smartphone Business Will Stay
Sony held its Investor Relations Day this week in Tokyo, Japan, and the company is riding high, with earnings in its most recent fiscal year (FY 2018 ended March 31, 2019) nearly doubling to ¥916 billion ($8.2 billion) and improvements in multiple businesses. The vast conglomerate has a wide range of businesses, but for DSCC Weekly Review readers we will focus on the display-related Home Entertainment and Mobile Communications segments, which followed presentations for Sony’s Game & Network Services (PlayStation), Music, and Pictures segments.Sony’s TV and handset businesses have been reorganized under its Electronics Products & Solutions segment, which also includes Imaging Products & Solutions. Among these three businesses, TV has been very profitable in the past few years, and Imaging Products has done well, but Mobile Communications has struggled with falling revenues and large operating losses.
Sony described its basic policy for the TV business as “maintain a stable business foundation based on large panel premium product strategy”. Sony highlighted both its 8K LCD TVs and its OLED TVs as flagships.
Source: Sony IR Day
For smartphones, the corresponding policy was much more pointed: “become profitable in FY2020. Reduce OPEX by completing transformation in FY2019, strengthen product appeal by leveraging leading technology from the Sony Group”. Sony outlined its approach of focusing on only a few key regions – Japan, Europe, Taiwan and Hong Kong, and described structural reforms which are expected to reduce Operating Expenses by 50% from FY2017 to FY2020.
Source: Sony IR Day
Sony outlined the FY 2018 results of its three business segments within Electronics Products and Solutions, but provided a FY2019 forecast of the combined group, as shown in the table below. Sony highlighted improvement in the product mix for TV by shifting to high value-added models.
Sony CEO Kenichiro Yoshida defended the handset business in a discussion with journalists, as reported by Reuters. “We see smartphones as hardware for entertainment and a component necessary to make our hardware brand sustainable,” he said. “And younger generations no longer watch TV. Their first touch point is smartphone.” Sony is improving the gaming functions of its smartphones to tap customers of its successful PlayStation gaming business.
The smartphone business has been a challenging one for many companies, with most of the industry’s profits going to two firms – Apple and Samsung. Although it managed to eke out a small profit in FY 2016, Sony’s operating losses in its Mobile Communications business have totaled $3.8 billion in the last five years. Sony was successful, however, in restructuring its TV business, which was losing money from 2010-2013. We will see whether they can repeat that success in a mature handset market.