Sony Corp. is facing an uphill battle to reclaim its former glory. Through the 1980s and '90s, the Japanese electronics giant was a household name. It brought consumers iconic products like the Walkman and Trinitron TV. It also had a big presence in PCs until it sold off its Vaio brand. Fast-forward to 2015: The Walkman is a relic, Korean companies like Samsung and LG rule the television market, and Sony’s mobile business could be in jeopardy of being sold or having to merge with another company for survival.
Sony’s struggles are evident in its September forecast of a 230 billion yen (US$1.9 billion) net loss for its fiscal year, which will end March 31. Sony will report its fiscal third-quarter earnings on Feb. 4.
Whether Sony can achieve a turnaround will depend to a great extent on the success of its efforts to boost its presence in mobile, which is a gateway to numerous other revenue-generating services, like search, advertising and mobile payments.
CEO Kazuo Hirai in early January named mobile among the operations Sony needs to “run with caution” moving forward. Efficiency measures include cutting an additional 1,000 jobs from its mobile business, on top of the 1,000 positions lopped in October, Reuters reported. Overall, the company plans to cut its mobile staff by 30 percent, to 5,000 employees, by March 2016.
So what happened to this company that was once an electronics industry staple? Too many power players and not enough power plays, analysts said. “It really boils down to management; it’s not structured like a company that needs to move nimbly to keep these divisions surviving,” said IHS analyst Wayne Lam. “I think it’s really bogged down by bureaucracy, and turf wars, like who gets what resources.”
Sony has fallen into a trap, similar to other legacy companies like Microsoft, Nokia and BlackBerry, which have lagged in the market after losing brand cachet. Some observers say Sony’s decline is in part due to a number of marketing missteps. “Sony has suffered from a lack of good marketing, similar to what Nokia did,” said Patrick Moorhead, principal analyst at Moor Insights & Strategy. “It became too obsessed with product placement rather than simply letting consumers know that they have possibly the best phone on the market.”
While devices like the Sony Xperia T smartphone were being featured in movies like the 2012 James Bond film “Skyfall,” manufacturers like Apple and Samsung were exercising more widespread campaigns to eventually snatch market share from Sony.
The Quality Is There
Still, analysts agree that Sony’s smartphones are quality enough to compete with the best on the market. “There is no comparison on brand. The Sony brand is the closest thing to Apple when it comes to charisma,” said Kantar Worldpanel analyst Carolina Milanesi.
Sony was one of the first manufacturers to make its smartphones waterproof. Sony’s devices also typically lead in battery life and camera quality, Moorhead noted. Additionally, Sony’s latest line of Xperia Z3 smartphones and tablets have a feature called Remote Play that allows users to stream PlayStation 4 games on the handsets. It’s an especially standout feature considering Sony’s gaming business is still formidable.
Sony might be considering leaving the mobile market, but such a move could lead to the company’s overall demise, as mobile is an integral part of the electronics market as a whole and a gateway for numerous revenue-generating services. “As for all vendors there is no real option of getting out of mobile as this is key to the wider device ecosystem,” Milanesi said. “Sony already exited the PC market -- which was the right thing to do -- but they cannot afford to exit smartphones and tablets as those are more and more linked to every other device we use.”
So what are Sony’s options? The company is now looking to expand interest in its high-end and mid-range devices by keeping them on the shelves longer. Many Android-powered phones remain popular for between three and six months before sales start to lag, Sony Mobile Taiwan general manager Jonathan Lin noted at a media briefing this week. "Our current strategy is on how to extend the product life cycle, for which we plan to offer more mobile content and new color phones," he said.
In the past, Sony sought a narrow life-cycle gap by churning out devices -- to wit, its Xperia Z2 flagship launched in March 2014, and then its Xperia Z3 flagship debuted in September. A purple model of the Xperia Z3 launched last week in Hong Kong and the U.K. Sony will now plan more promotional events and sales of its smartphones to generate interest in flagships already on the market. “There is definitely opportunity for [Sony] to reduce R&D costs and cap expenditure for new products because they can just recycle these components,” Lam said. “That’s a sign of the time, trying to reduce costs and prop up profitability and get the most out of designs.”
Sony may also delay the launch of its Xperia Z4 flagship for several months to put more attention on the Xperia Z3. Originally, rumors suggested the device might launch at the World Mobile Congress in March. Now, the Xperia Z4 is expected to arrive sometime in the summer, according to Xperia Blog.
But putting a brighter spotlight on a handful of existing devices may not be enough to propel Sony Mobile to the kind of international recognition it needs to boost sales. While the company is quite popular in its home market of Japan, as well as a few locations in Europe, Sony lacks the market presence that would make its devices appealing to consumers in the U.S., Lam noted. Currently, Sony devices are available through only two U.S. carriers, T-Mobile US Inc. and Verizon Communications, with its Verizon partnership being fairly recent. Many U.S. consumers might not even realize Sony is an option in smartphones.
Ace In The Hole? PlayStation
But Sony does have a couple of aces yet to be fully exploited. Since the company is also in the movies, music and gaming businesses, analysts said it could benefit from providing exclusive content from these services on its smartphones. In particular, the company could greatly benefit from tighter integration of gaming on its mobile devices. Yes, Xperia users can stream PlayStation games onto their mobile handsets, but they cannot play those games natively. “Sony’s not really empowering these little divisions to be innovators. Like letting mobile handsets tap into PlayStation, it’s almost forbidden,” Lam said. “There’s a lot that Sony can do with integrating PlayStation content onto phones, and [it] just hasn’t done it.”
Sony has been timid about moving in the direction of direct gaming integration, but it may become necessary as competition gets tighter between Sony and Microsoft, in particular. Sony and Microsoft are the Apple and Samsung of the gaming industry, each having strong flagship products and striving to one-up the other. Microsoft’s Xbox One console outsold Sony’s PlayStation 4 for the first time in the fourth quarter of 2014, due mainly to holiday discounts. Prior to that, Sony has had a consistent lead since both consoles were released in 2013.
To Sony’s benefit, Microsoft has also lagged in terms of mobile integration on its own smartphones. The company previewed its Windows 10 operating system last week, which is intended to be a cross-platform system for PCs, tablets and smartphones. However, there remains a divide between these platforms and the Xbox One console. Windows 10 users will be able to stream Xbox One games to tablets but not smartphones.
Other standout areas for Sony include its display and camera businesses. Even its top competitors like Apple and Samsung use Sony lenses in their mobile cameras. The manufacturer is also making strides in the wearables and connected-devices businesses. “This could pay off in the longer term if Sony manages to convince [its] distribution partners to accelerate in that space,” said Forrester analyst Thomas Husson.
All of this hinges on the right moves by Sony. The company needs to leverage the breadth of its ecosystem to see a turnaround in mobile. “Sony is kind of stuck at this level where it’s not enjoying the global scale that it should. It’s really time for it to make an investment or just cut it off,” Lam said.