Sony Stakes Recovery on New Smartphone As Its Historic Businesses Fade, Electronics Maker Borrows From Cameras, TVs to Aid Chances Against Apple, Samsung
BY DAISUKE WAKABAYASHI
TOKYO—When the head of NTT DoCoMo Inc., Japan's big-gest mobile carrier, took the stage in January to introduce its latest models, he declared Sony Corp.'s new Xperia Z smartphone his company's top pick, the equivalent of a mother announc-ing her favorite child. For Sony, it was a much-needed vote of confidence for one of the company's most im-portant new products in recent memory. The Xperia Z's importance is reflected in the way that product groups bridged traditional di-vides to collaborate on the proj-ect. Sony tapped its top Cyber-Shot engineers to improve the device's digital camera. It added the picture processing engine from its Bravia televisions for sharper video playback and as-signed its ace industrial designer to give the phone a look like classic Sony products. "Sony has realized that mo-bile is so central to what Sony the corporation does. It is proba-bly the most important things that it does from now on," said Shaun Collins, chief executive of mobile technology research firm CCS Insight. Turning around its handset business and cracking the mobile industry duopoly of Apple Inc. and Samsung Electronics Co. is central to Sony's long-term strategy Not only could it serve as a driver of future growth, it is a way to protect its flank as do-everything smartphones weigh on sales of Sony's traditional strongholds in digital cameras, music players, and portable game systems.
Uphill Climb Rising smartphone unit sales a rare bright spot
Sony unit sales, by product`:
Smartphones 22.5 million 34.0 million Dig iti-dcorrinact cameras 21.0 15.0
LCD Televisions 195.6 :tern:
•.;
' fiscal bears end March 31
Top-five global cellphone market share, 40, 2012:
Sony Ericsson cellphone sales, for both feature and smartphones:
San1siing 2q.Crib Huavvel 4,9% Sony 100 million phones 80 60 40 20
4.5%
'03 '04 '05 '06 '07 '08 '09 '10 '11
Source:1DC (phone shares); Sony (product and mobile sales) Photo illustration by The Wall Street Journal; Bloomberg News (photo)
"Smartphones are one of the rare growth areas in consumer electronics. All the other areas are just maintaining or declin-ing," Kunimasa Suzuki, the head of Sony's mobile business, said in a recent interview. The Xperia Z is symbolic of Chief Executive Kazuo Hirai's vi-sion for a more unified Sony. Mr. Hirai's predecessor and current board chairman Howard Stringer also tried to break the com-pany's "silo" mentality of prod-uct groups protecting their own profit/loss statements—some-times at the expense of the over-all well-being of Sony. So far, so good. The Xperia Z has received solid reviews and
the phone has been selling briskly in Japan, leading to a waiting list for shipments. It launched in France on Feb. 20 and the U.K. on Friday. Sony said the Japanese demand and early orders in Europe have exceeded its own projections, but it didn't specify figures. It hasn't an-nounced plans for the U.S. mar-ket, where Sony Ericsson had been traditionally weak. The Xperia Z is a premium-price model in the mold of Ap-ple's iPhone and Samsung's Gal-axy S. With a five-inch screen, it is slightly larger than both the iPhone 5 and Galaxy S3. It is wa-terproof, dustproof and comes with a higher-resolution camera
than Apple and Samsung's top-of-the-line phones. However, those hardware advantages may be short-lived since Samsung is introducing it latest Galaxy S later this month and Apple is also expected to roll out a new iPhone this year. Sony needs to make up for lost time. Sony ranked fourth among global smartphone manu-facturers with a 4.5% share in the fourth quarter of 2012, trail-ing Samsung, Apple, and China's Huawei Technologies Co., ac-cording to researcher IDC. In a decade littered with missed opportunities and strate-gic missteps for Sony, none weighed more heavily than its
The Wall Street Journal
2001 mobile phone marriage with Sweden's Ericsson. Sony bought out its partner for €1.05 billion ($1.4 billion) in 2012. Sony was stuck in a no-win situation. Sony Ericsson's smart-phones would continue to strug-gle unless it could take advan-tage of Sony's consumer electronics assets. But Sony ex-ecutives had reservations about handing over its technology and brands, while only receiving 50% of the rewards. This complicated dynamic be-tween the two parent companies also delayed the timing for new products. If product develop-ment teams wanted to use a Sony technology or brand, it had
to be approved by Sony Erics-son's board. "It was frustrating because it felt like we were missing an op-portunity," said Sony Mobile ex-ecutive vice president Kaz Ta-jima, who oversaw the development of the Xperia Z. Sony mobile executives said the company's product divisions are now more involved and more willing to loan out talented engi-neers and designers. In the past, Sony Ericsson could rarely tap Sony's best talent because the joint venture "was lower in the draft order," said Mr. Tajima. The cooperation is also a sign of Sony's dire reality. It lost money in each of its last four fiscal years, a cumulative loss of V856 billion ($9.3 billion). It is forecasting a return to profit in the fiscal year ending March 31. In addition, demand for tradi-tional electronics is declining. Sony sees unit sales of video camcorders sliding 9%, digital compact cameras falling 29%, and televisions dropping 31% in the year to March. By compari-son, Sony's smartphones sales are expected to grow by more than 50%. With a goal to return the mo-bile business to profit in the coming fiscal year starting in April, Sony said it aims to im-prove the group's profit margins through joint procurement of key components with the other electronics units. "It is like a new world is opening up," said Kaoru Kato, DoCoMo's chief executive, grin-ning as he held up the Xperia Z.
? Heard on the Street: Smartphone makers' math doesn't add up B14