Premium handset strategy hits Sony sales

Following a revaluation of its mobile division, Sony's expected losses for the company's current fiscal year are up four times over, from 50 billion yen to 230 billon yen, or $2.41 billion (See: Sony sees annual loss mounting to $2.5 billion as smart phone business struggles).

The company explained this in a press release to investors, "As a result of revising the Mobile Communications (''MC'') segment's Mid-Range Plan (''MRP''), as discussed below, Sony Corporation will record an impairment charge of approximately 180 billion yen, the entire amount of goodwill in the MC segment, in the second quarter of the current fiscal year."

The charge comes partly from Sony altering its handset strategy across a number of regions around the world. The company is consolidating its lineup of phones, with fewer mid-range models, concentrating on its premium handsets.

According to commentators, the recently announced Sony Xperia Z3 and Z3 Compact then were what one could expect from Sony.

Though both handsets are said to be top-notch Google Android phones, this strategy has been tried out by other handset makers. A similar approach was staken by HTC a few years ago -  and it too continues to struggle as growth for smartphone sales is much lower than basic handsets.

Meanwhile, Sony Corp slashed its earnings outlook for the sixth time under chief executive Kazuo Hirai on Tuesday as it announced a massive impairment charge on its smartphone unit, which it had failed to grow even amid a rapidly expanding market, Reuters reported.

According to Hirai mobile would continue to be one of the three core divisions of its electronics business, even though its shrinking footprint and ballooning losses now threatened the prospects of that flagship business reporting a profit this year.

Sony, which once eyed the third spot in the smartphone market behind giants Apple Inc and Samsung Electronics Inc, had been forced to rein in its ambitions in the rapidly growing mobile market as with other consumer electronics.

According to Yasuo Sakauma, portfolio manager at Bayview Asset Management in Tokyo, whether they cut their forecast four, five or six times it did not really matter. He added, what was more important for the market was whether this (restructuring) would put an end to their problems as they said it would.

Analysts said the news was in line with expectations after Sony flagged a potential writedown on the mobile unit in July in what it said was a piece of a crucial restructuring plan Hirai had promised to complete this year.