Sony Mobile swings from massive losses to a profit, but it's a dead division

It’s earnings time again, which means good and bad news for Sony. The good news is that Mobile is profitable. From Android Authority, according to Sony:

Mobile Communications division had generated an operating income of 10.2 billion yen, or about $91 million. This was compared to an operating loss of 61.4 billion yen, or about $550 million, in the previous fiscal year.

And that’s really the extent of the good news, which, at first, isn’t bad at all. Reversing your fortunes and going from a $550 million loss to a $91 million profit is most certainly noteworthy. But, and here’s the big but:

Sony’s sales revenue for the last fiscal year came in at 759.1 billion yen, or $6.778 billion, which was down over 32 percent from the previous year.

Why the steep drop in revenue? Because Sony hasn’t been able to convince anyone to buy their phones, which means the financial recovery has actually very little to do with Xperia phones sold.

Sony said that it sold about 14.6 million phones in the just completed fiscal year, down from 24.9 million units in the previous year.

That’s right, Sony will finish the year selling under 15 million phones with their most recent quarter accounting for only 2.9 million Xperia units. So how did they squeeze out a profit?

mainly due to a reduction in operating costs including the benefit of restructuring initiatives

Kaz Hirai has mentioned recently that they plan on sticking in the mobile space in order to maintain a presence with retailers, carriers, and consumers in preparation for the next hit product (whatever and whenever that may be) but if the best you can do is sell under 3 million devices in a quarter, you have to ask yourself if you really do have a relationship with the mentioned groups at all. As it stands, quarter after quarter, Mobile sales are declining and the division will soon reach a point that no matter the cost cutting measure, their overhead will simply be greater than any profit the division can bring in.

I hope the new Xperia fleet does better in 2017 (and according to internal forecasts, they believe it will) but if sales continue to decline this year, I fail to see a reason to keep the division around. Instead, wouldn’t Sony be better off freeing up the resources and engineers dedicated to Mobile and placing them on other projects?

FY2016

 Sales: 32.7% decrease (FX Impact: -3%)

(–) Decrease in smartphone unit sales mainly in Europe, the Middle East and Latin America
(–) Significant downsizing of unit sales in unprofitable regions

 OI: 71.6 bln yen improvement (FX Impact: +26.1bln yen)

(+) Reduction in operating costs including the benefit of restructuring initiatives
(+) Improvement in profitability resulting from a concentrating on fewer geographic areas and a focus on high value-added models
(+) Positive impact of foreign exchange rates
(+) Reduction in restructuring charges
(–) Decrease in sales

FY2017 Forecast

 Sales: 8.0% increase