Sony Hopes To Not Fully Exit Smartphones Even Under a Plan B, CEO Says

Sony’s mobile communications businesses are among the “areas of volatility management,” not “growth drivers” or “stable profit generators,” under the company’s three-year “corporate strategy” plan disclosed Wednesday. Sony sees its semiconductor, games, Sony Pictures and Sony Music businesses as growth drivers, and imaging products and video and sound as stable profit generators. But TVs, smartphones and tablets “operate in markets characterized by high volatility and challenging competitive landscapes,” Sony said. “Sony will place the highest priority on curtailing risk and securing profits in its operation of these businesses. Since both markets are experiencing intense cost competition and commoditization, Sony will strive to further increase the added value of its products by leveraging its in-house technologies and component devices.” Sony won’t chase market share or volume sales in TVs or mobile communications, but will rely on niche sales of products that don’t require high scale, CEO Kazuo Hirai said Wednesday on a conference call for overseas investors. “These two businesses are areas where we really need to focus on the volatility management,” Hirai said in answer to a question of whether Sony’s “Plan B” might include exiting the TV or mobile communications businesses. “The market is very quickly changing, and we obviously need to stay competitive with our products,” Hirai said. “With these two businesses, we need to especially keep an eye on the competitive environment, how profitable these businesses are for us, and what the future prospects of these businesses look like.” Sony plans to review those metrics “very often” to be sure “we feel comfortable with where we are in these businesses,” Hirai said. “And if in fact we make the determination that we aren’t comfortable being in these businesses, given some of the factors I talked about, we need to take a look at a variety of different options for Plan B.” Hirai said he hopes that Plan B won’t amount to “a complete exit” from the mobile communications business, “because we learned when we exited the PC business that the cost impact was tremendous.” The “better alternative,” he said, should Sony need to “go down that path,” would be to “partner up with other companies, third-party companies, that are willing to get into this space or expand their reach or are interested in some of the potential of brand collaborations that we can bring to bear.” Those possibilities strike Hirai as “more palatable as a Plan B option as opposed to getting out of these businesses outright.” Hirai acknowledges that “it’s very apparent to us” that smartphones are still “a very aggressively growing business,” he told another questioner who asked why Sony was unable to group mobile communications with other Sony growth drivers. “But the volatility involved in the business also makes it a very challenging one, where we need to, instead of go for scale, really make sure we’re driving the business in a very safe way,” he said. “One of the things we see when we look back with 20/20 hindsight is the fact that we tried to ride the growth in the smartphone business too aggressively.” Sony incurred huge cost impairments, and Hirai said that’s “obviously something that we don’t want to go through once again.”