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While it’s no secret that the mobile division of Sony has been struggling, it appears that the other units are not doing so well either and in an attempt to cut costs, the company has decided to resort to some austerity measures. Per the company’s Chief Financial Officer Hiroki Totoki, the manufacturer is going to shut down smartphone production in Beijing and exit some markets including the Middle East and South America.
The report follows a previous report that claimed that Sony will be shutting down its Beijing smartphone facility in the hopes of cutting costs and making the business profitable from 2020. The company recently downgraded its financial forecasts for most divisions and said that it expects its operating profit to fall.
Sony’s smartphone business, which is known as Xperia, made a loss of 41.1 billion yen or $368 million this quarter and the latest move will help the company reduce its expenditure. Last month, the Japanese manufacturer had announced that the Xperia business will be merged with the camera, TV, and audio division. The company expects the new unit to turn up a profit of 121 billion yen or $1.1 billion this fiscal year, which would be a 58 percent year-on-year improvement. However, the increase in operating profit is expected to be a result of costs cuts in the smartphone division and not an increase in revenue.
Sony’s beleaguered smartphone unit has suffered greatly because of the company’s love affair with old school design as well as rising competition from other vendors. On top of that, its phones commanded really high prices. It was previously reported that the company is also going to pull out of Africa and Turkey. Sony has also quietly shut down one of its official stores in Malaysia and the company’s Malaysian website also makes no mention of smartphones. The company has also shut down shops in the U.S. It remains to be seen if the manufacturer will continue to sell its mobiles in these markets through online channels.
Sony’s gaming division, which is doing all the heavy lifting, is also not expected to perform as well as it did last year. There are also reports that investor Daniel Loeb’s hedge fund Third Point is building a stake in the conglomerate and is pushing the company to get rid of the loss-making units. While there is no direct indication that Third Point is behind the company’s decision to do something about the mobile unit, other reports had suggested that stakeholders are exerting a pressure on the company to act fast.
Sony also says that reducing expenditure in the mobile unit will help free up some cash to build a successor to the PlayStation 4. The hardware is not expected to come this year and this would give an opportunity to the company’s competitors to woo its fan with their products.
Sony’s has less than one percent market share in the smartphone industry and some analysts believe that the company should sell its mobile business. However, the company is apparently counting on 5G to turn its fortune around by next year. Although the company reportedly shipped just 6.5 million smartphones this financial year, it does have a small group of dedicated users who would decidedly be upset if the business is shut down completely.