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Without grand plans for China, U.S., Sony set to lag in smartphones

Bollywood actress Katrina Kaif displays the Sony Xperia Z high-end smartphone during its launch in New Delhi March 6, 2013. REUTERS/Mansi Th
Bollywood actress Katrina Kaif displays the Sony Xperia Z high-end smartphone during its launch in New Delhi March 6, 2013. REUTERS/Mansi Th

By Reiji Murai and Sophie Knight

TOKYO (Reuters) - Kazuo Hirai's plan to restore Sony Corp to lasting profitability rests in large part on its smartphones leapfrogging rivals to become the world's third-biggest sellers after the Apple iPhone and Samsung's Galaxy series.

But that goal remains some way off. Sony's CEO, installed last year with a brief to turn the serial loss maker around, said on Friday that for now, Sony has no big plans for the world's two largest smartphone markets, China and the United States.

Instead, Hirai said Sony, which aims to rise to third position from its current ranking of seventh, will focus on Europe and its home market in Japan, which collectively account for 60 percent of its smartphone sales.

"Those two are the most important areas for us and we'll put substantial resources there. But not yet for the U.S. and China," Hirai told a gathering of journalists.

"It's not realistic to try to do everything at once. In the U.S. we'll start gradually."

In the U.S., only the fourth-largest carrier T-Mobile US Inc offers Sony smartphones. Meanwhile, Sony has been unable to compete in China with homegrown brands from ZTE to CoolPad despite contracts with the three largest carriers.

Sony is not among the top five smartphone brands in either of those markets, according to research firm IDC. Its global share of the smartphone market was a modest 2.2 percent in the second quarter of this year, according to research firm Gartner, trailing the likes of LG Electronics Inc and Lenovo Group Ltd as well as Apple Inc and Samsung Electronics.

Hirai has positioned mobile devices as one of the three pillars for a turnaround of the company's electronics unit, which relied on help from a weak yen to post a profit in the latest quarter - its first quarterly profit in two years.

The other two key divisions are games, where the PlayStation 4 console due for launch next month has drawn strong pre-orders, and digital imaging, where Sony dominates the production of image sensors for smartphone cameras.

Against that background, smartphones could end up the weakest link in the strategy.

NOT EXCEPTIONAL

"Their devices are OK but frankly not compelling. They're fine, but they're not exceptional," said Benedict Evans, an independent mobile and telecommunications analyst based in London.

"But the deeper problem is that when you're selling devices made on someone else's platform it's extremely difficult to differentiate."

Even in its home market, where Sony ranked No. 2 in the latest quarter behind Apple, the outlook has become tougher. Last month Japan's largest carrier, NTT DoCoMo Inc, which in its summer campaign favored Sony's Xperia over other domestic brands, struck a deal with Apple to carry the latest iPhone.

Still, Hirai said the Xperia's established reputation in Japan should help to see off the threat from Apple. "We have strong brand recognition here for Xperia's hardware and services," Hirai said.

The company has set a target of selling 42 million smartphones worldwide in the financial year to next March, an increase of 27 percent from a year ago.

In 2012, Samsung shipped 218.2 million Galaxy phones while Apple sold 135.9 million iPhones, according to IDC.

(Reporting by Reiji Murai and Sophie Knight; Editing by Edmund Klamann and Kenneth Maxwell)

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