Sony reveals its 'turnaround' strategy: More PlayStation, fewer phones

Sony's electronics division, buffeted by several years of poor sales, announced a three-year plan to return to profitability. Under the plan, Sony will sell fewer TV and smart phone models, focusing instead on PlayStation and related services.

Toru Hanai/Reuters
Sony has announced a three-year plan under which it will focus on the PlayStation while pulling back on smart phones and TVs. Here, a Christmas tree is reflected in a 4K TV set in Sony headquarters in Tokyo.

It’s been a tough year for Sony. The company’s mobile division lost $1.5 billion last quarter, Sony had to make the tough decision to sell its VAIO PC division earlier this year, and on top of all that, a hacker group put the company network on lockdown this week.

But the company has come up with a three-year plan to regain its footing, executive Hiroki Totoki said at an investor conference on Tuesday. That plan essentially boils down to making fewer TVs and smart phones, and focusing on PlayStations and image sensors.

The PlayStation has been a consistent bright spot for Sony, even as it has lost ground in other markets: the company sold 3.3 million PS4s last quarter, exceeding combined Xbox 360 and Xbox One sales (2.4 million, taken together). Sony plans to increase sales in its video game division by a quarter, to $13.6 billion, within three years.

The company’s video and music subscription services, which are designed to work with the PS4, will help bring in extra revenue, Sony said. (PlayStation Vue, a Netflix-esque video service, isn’t ready for prime time yet, but the company says it’ll soon be ready to release to customers.)

The company’s image-sensor division has also been hugely successful: Apple uses Sony sensors in the iPhone, and many Chinese handsetmakers use them as well. Sony thinks it could see a 70 percent sales increase in the image-sensor division over the next year.

Sony also plans to reduce the number of different smart phone models it makes, in an effort to stem the losses its mobile division is currently suffering. (Sony already fired Kunimasa Suzuki, the CEO of the mobile division, replacing him with Mr. Totoki.) Sony’s Xperia smart phones haven’t been doing well against competition from Apple, Samsung, and other companies, and Sony says it will give up trying to compete for market share, concentrating instead on a smaller number of profitable handsets.

Mobile sales might decline as much as 30 percent under this strategy, Sony said, but the company will make a profit nonetheless. Totoki told investors that more details about the company’s plans for its mobile division will be revealed early next year.

Sony will also put less emphasis on making TVs under the turnaround plan. The company’s Trinitron sets were tremendously popular for decades, but in recent years, Samsung, LG, and other setmakers have dominated the market by bringing new features such as OLED technology to customers more quickly and cost effectively than Sony. Totoki told investors the company will make fewer different TV models in order to cut costs, but that it will also double down on movie and TV programming, hoping to raise revenues in that area by a third over the next three years.

Totoki summarized the plan by telling investors: “We're not aiming for size or market share, but better profits.” Sony shares rose 6 percent following the conference, suggesting that investors believe the company can make good on its promise of profitability.

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