Sony Mobile Cuts Sales Forecast from 43 to 41 Million, Reduction in China

Sony has posted their Q2 2014 earnings results that cover the July-September time frame and as expected, Sony Mobile caused the company as a whole to once again post a loss. What was suppose to be the year of recovery for Sony has been anything but that. During summer, Sony posted a new earnings guidance for the year which would see their smartphone shipments dip from 50 million down to 43 million. A week ago, word came that Sony would likely further revise that number and during their earnings call earlier today, the company did just that. Now for the year, Sony is expecting to finish with 41 million units sold, down another 5% and close t0 39 million, the number the company sold in 2013.

For the quarter, sales in mobile were flat with 9.9 million units sold, compared to 10 million in Q2 2013. Sony also reported a higher marketing and R&D expense for the quarter “in order to expand sales channels” though those clearly didn’t help sales. A big reason for the cut in the sales forecast is China. Due to tough competition from the low-end and mid-range devices coming out of China, Sony has found itself unable to compete. Chief Financial Officer Kenichiro Yoshida

We are at a phase where we need to rebuild our shaky earnings. We are planning a significant reduction in China

This means that if Sony wants to see its sales number increase for FY 2015, they need to focus on other territories as competition from China is only going to increase while Sony further reduces its presence in China. This means in Q4 2014, Sony must sell 12.9 million units, an increase of 11% of the previous quarter, to hit their 41 million unit sales forecast for FY 2014. Otherwise, expect another revision to come and even bigger losses for the year. In comparison, Apple had 20 million pre-orders for iPhone 6 and iPhone 6+ in China prior to launching a little over a week ago. While Apple has been successful at holding the premium market and expanding to China, Samsung has shared a similar fate to that of Sony with profits dipping nearly 60% due to tough competition from Apple and a lack of demand for their products in China.

Unsurprisingly, Sony has announced that Hiroki Totoki will replace Kunimasa Suzuki as CEO of Sony Mobile Communications. We’ll have deeper analysis of Sony’s earnings later in the afternoon.