Sony's CEO low on options as smartphone business falters

TOKYO – Sony Corp. Chief Executive Kazuo Hirai is running out of options to turn around Japan's iconic consumer electronics maker.

The Tokyo-based company said Wednesday it would report a wider full-year loss of $2.1 billion because it was writing down the value of its faltering smartphone business. Sony also said it won't pay an annual dividend for the first time since its listing in 1958.

Hirai has been working to turn around Sony by emphasizing entertainment and game content, consoles and mobile devices as demand for televisions and compact cameras has declined. With the Xperia smartphone lineup struggling, his other options for reviving the company are Hollywood movies, music and the PlayStation video-game business.

"Sony should have done it earlier," said Masahiko Ishino, an analyst at Advanced Research Japan Co. "A lot of people were questioning why it didn't write down the mobile goodwill earlier as the business hasn't been doing well since the beginning of the fiscal year."

In Tokyo, the stock fell 1.8 percent to 2,123.50 yen, paring a 16 percent gain this year.

Sony is taking a 180 billion-yen impairment charge because it expects less cash from the smartphone business, the company said in a statement. It is cutting about 1,000 workers from the 7,100-person unit and reducing the number of midrange models as Chinese manufacturers gain global market share, Hirai said in a briefing.

"With regards to competition, while there are many forces at play, one of them is Chinese smartphone makers who, especially within the Chinese market, are dramatically breaking through," Hirai said.

Sony was passed in smartphone sales by Chinese makers including Huawei Technologies, Lenovo and Xiaomi that offer feature-packed devices for as low as $100. Beijing-based Xiaomi, the top seller in China, plans to boost its global sales to 100 million units next year.

Sony's mobile products unit posted a loss of 2.7 billion yen in the first quarter. The company isn't paying a dividend this year after paying 25 yen per share last year. Hirai said his "No. 1 responsibility" is to reinstate the dividend.

Sony trails Samsung and Apple by a wide margin in global smartphone sales, ranking ninth in the second quarter with shipments of about 9.4 million units, according to data compiled by Bloomberg. Samsung unveiled its Galaxy Note 4 device on Sept. 3, and Apple is scheduled to release its new iPhone 6 models on Sept. 19.

"Sony couldn't help but admit the limitation of sales and profit from smartphones and tablets," said Yasuaki Kogure, chief investment officer at Tokyo's SBI Asset Management Co.

Sony is trying to boost overseas sales for the Xperia. SoftBank and its U.S. unit Sprint will offer the devices for the first time, and sales may start by the end of the year, a person familiar with the matter has said.

Earlier this month, Sony unveiled new devices that function as displays for PlayStation games. The Xperia Z3 smartphone is waterproof and comes with a battery that can stay charged for two days, and the Z3 Compact smartphone has a 4.6-inch screen, the company said.

Sony's announcement comes less than two months after posting a surprise profit of 26.8 billion yen in the first quarter as the PS4 led console sales and "The Amazing Spider-Man 2" topped Hollywood box-office receipts. The PS4 has beaten sales of competing machines from Microsoft Corp. and Nintendo Co. for eight straight months, Sony said last week.