Sony Q1 profits surge, despite making a loss on smartphones

Sony has just released its financial results for Q1 2015, which has seen the company’s profit jump by a huge 39 percent compared with the previous year. However, Sony’s mobile division fared less well, with sales falling by 16 percent year-on-year.

Starting with the good news, overall quarterly revenue reached $14.5 billion, remaining virtually unchanged from the year before at only -0.1 percent. Thanks to the company’s major restructuring program, this resulted in a 39 percent increase in profits, up to $780 million for the quarter.

That isn’t so say that all of the company’s divisions all performed equally or remained stagnant over the past year though. The majority of Sony’s additional revenue came from its growing music and gaming divisions, which saw income jump by 173 and 350 percent respectively.

Sony’s image sensor business was also another big winner, with income reaching $244 million, up a huge 164 percent year over year. Sony has seen increasing demand for its high-quality image sensors not only for use in flagship smartphones, but also from lower-cost Chinese brands looking to one-up their competitors. Increasing demand for high quality front cameras for smartphones is also boosting revenue.

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Sony’s mobile division is a different matter though. Sales slumped by 16 percent YoY, resulting in a net loss of $184 million, an even greater loss than the company’s movie business. Sony suggests that the decline comes as a result of trying to improve profitability rather than pursuing scale, but I have a suspicion that it’s more to do with the company’s product line-up.

The new Xperia Z3+ flagship, or Z4 if you prefer, is another minor upgrade to the Xperia Z range, which probably leaves the average consumer scratching their head as to what’s changed. The company has also been caught out at the low and mid tiers of the market, where hardware specifications and price points have become substantially more competitive in the past twelve months or so. New releases like the Xperia M4 Aqua just don’t offer the same value for money as Sony’s competitors.

Sony now expects that its full-year loss for the mobile division will reach a substantial 60 billion yen ($480 million), which is worse than the 39 billion yen ($310 million) loss that it anticipated back in April.

It seems clear that Sony needs to overhaul its smartphone strategy if it hopes to return the division to a profit. Perhaps the future is in flying drones or resorting to a more stock-like Android experience?