Sony CEO Hirai Says Electronics Turnaround Past Midway Point

  • Smartphone division to complete reorganization this year
  • Mobile phone unit sale still an option if restructuring fails

Sony Corp.’s struggling electronics businesses have passed the midway point on the way to financial health, President Kazuo Hirai said.

“Three years of restructuring are beginning to bear fruit,” Hirai told reporters during a group interview in Tokyo on Wednesday. “Except for smartphones, every business was profitable in the first quarter. That’s how far we’ve come in turning electronics around.”

Hirai has said this fiscal year marks the beginning of an expansion phase after the maker of the PlayStation 4 cut thousands of jobs and shifted its focus away from smartphones and TVs. Hirai’s management plan, announced in February, calls for games and services, image sensors, movies and streaming music to drive growth in the next three years.

Sony is targeting its highest profit since 1998 after posting net losses of more than $10.7 billion during the past five fiscal years because of rising competition in the TV and smartphone businesses and a weaker yen. It’s forecasting an operating income of 500 billion yen ($4.2 billion) in the year ending March 2018. Its shares are up 30 percent this year.

“The smartphone business will turn the corner this year and get on track next year,” Hirai said. “If not, we can’t exclude other options.”

Apple, Samsung

Hirai previously said unprofitable businesses may be sold off, as Sony did with its Vaio brand last year. Under his management plan, TVs and smartphones are subject to “volatility management.”

While the TV operations returned to profit last fiscal year, the company expects its Xperia phone unit to report a 60 billion-yen loss in the year to March 2016. Sony stopped developing new smartphones for China and culled the Xperia lineup as it struggled to compete with Apple Inc., Samsung Electronics Co. and Chinese vendors. The company took a 180 billion-yen charge in the business last fiscal year.

Sony is gradually spinning out its different businesses into individual, separately run units as part of a corporate overhaul intended to heighten accountability and make it easier to sell underperforming assets. Its video game, movie and music businesses already operate independently of the Japanese parent.

The company this month spun off its iconic Walkman brand into a separate company along with headphones, home theater equipment and Blu-ray players, following a similar separation for TV last year. It’s also hiving off its semiconductor business to allow it to focus on high-growth areas such as image sensors.

“About 70 percent of our sales comes from separate company units,” Hirai said. “From financial services to entertainment, we have a pretty good idea what does and doesn’t work with this strategy.”

Before it's here, it's on the Bloomberg Terminal.