Sony: The OEM You Want To Save
In our recent Discuss article, we asked you readers on which OEM you would like to help. While the answers we received were varied, a lot of these responses and top comments stood out for helping one OEM: Sony.
Some excerpts from our discussion are as below:
And many more follow suit. Needless to say, many believe that Sony Mobile as a company is great and is worth saving. And all of these would be happy to hear that Sony will “never ever sell or exit from the current mobile business”, atleast that is what the CEO of Sony Mobile, Hiroki Totoki says.
In an interview with Arabian Business, Hiroki Totoki touches upon different aspects of Sony and its mobile division. Appointed as the CEO of Sony Mobile in November 2014, Mr. Totoki has had a rather successful history at Sony, holding a number of executive roles in his years of service. His appointment came at the time where Sony had started to struggle thanks to poor sales performance and fierce competition in a globalized world. Add to this the fact that the company had to still write off a massive $1.5 billion impairment charge after their split with Ericsson in 2011, and you can see why the company was in dire need of a steady decision maker.
I was told that I would become CEO of Sony Mobile in, I think, October, and I was told that this company needs to be turned around as quickly as possible.
So I’ve had to work very hard and I have been busy, but people are very cooperative and have shown a lot of energy to turn around the position, which is a good thing. I’m confident that things will continue to get better.
Mr. Totoki had his task cut out for him, and in order to do it, he had to resort to strict measures.
We are trying to decrease our costs by 30 percent to the end of 2016, and reduce our headcount by 20 percent.
We are trying to streamline the organisation as well as our product portfolio to maximise our profitability and improve our ROI. We have set out our plan already and are just starting to execute it. This year, 2015, is a year of big transformation, and we will try to complete this transformation by the end of the year, and hopefully see an improvement in financial performance in 2016.
The interview proceeds on to address a rather serious rumor: Will Sony sell its mobile division? Mr. Totoki assures that it won’t, and that these fears originate from a combined effect of writing off the impairment as well as Sony’s exit from the PC business.
The speculations arose because in 2014 we made a huge loss as a mobile business.
It mainly came from the write-off of the goodwill of our impairment asset. When we bought back Ericsson’s share [in 2012], we bought back 100 percent of it. And obviously that price was high. We had to write it down and it made a substantial loss for the company.
But this was an accounting loss and did not impact our cash flow. Our cash flow is very healthy. But the accounting loss was so huge — that’s why people have speculated like this.
Before that rumour, we exited the VAIO business, which was the PC business. That led people to think that Sony would exit the smartphone business, as well. But the smartphone business is very different from PCs.
Smartphones are completely connected to other devices, also connected to people’s lives — deeply. And the opportunity for diversification is huge. We’re heading to the IoT (Internet of Things) era and have to produce a number of new categories of products in this world, otherwise we could lose out on a very important business domain.
In that sense we will never ever sell or exit from the current mobile business.
His statements do not exactly refer to the fate of Sony’s mobile lineup, but go in a rather roundabout manner to say that Sony will not exit out of the mobile business because it is tied up directly and indirectly to the IoT, which he believes will play a significant part in the future.
Of course, this could be the cynic in us trying to read between the lines. Nonetheless, as the CEO of Sony Mobile, Mr. Totoki is optimistic about the future and Sony’s position in it.
When we introduced the Z3 to the market it was very well accepted. But now we see a lot of emerging players, including Chinese manufacturers trying to make good quality smartphones, so the competition has become severe.
We’re trying to introduce new technology in the future and diversify our product even more. The quality and strength of the product is always the starting point as far as strategy goes for the company.
For example, with the C4, people like the wider screen, and that product has won some segment in this area, and initial feedback is very good, so I’m confident it will be a success.
Moving on to the topic of smartwatches and wearables in general, Mr. Totoki is keen on expanding beyond these, more specifically to IoT.
We launched our smartwatch relatively early in the industry.
We’ve got a good feel for the technology and we’re not limited to the smartwatch. We include smart wear, smart products, and smart devices, and there are many more things now being made for the IoT (Internet of Things) era.
Those types of devices, and that side of the industry have become huge, and not limited to a smartphone device. Now we try to develop smart devices that are connected to the smartphone. In the future there will be categories of products that will connect to the network, connect machine to machine, connect machine to human, and connect human to human.
That sort of connectivity will expand and we will try to develop even more categories in the future. That’s one major focus for this company. It’s a big future strategy.
Talking about competition, Mr. Totoki agrees that the competition is indeed making things interesting. But he believes that the experience Sony provides, as well as innovations and advancements in technology that it can borrow from Sony’s other divisions, will help them to stay relevant in the future.
The smartphone device consists of a battery and a screen and chips. These are the main parts of a smartphone, and people can easily make them now.
But it is the user experience that is not the same. Even if the device is the same, the user experience is different. And this is a very important point. People are not buying a smartphone because of the device and the way it looks — they are buying it because of the experience.
Of course we are using a very good quality of image sensor that our colleagues at Sony created. That’s the craftsmanship in technology that we have to install to provide the best user experience. That sort of craftsmanship in technology is very important — it’s key to becoming more than just a mere smartphone. It takes the quality higher, improves the brand image, and the user experience.
On the topic of 5G and Sony’s preparedness to release a 5G-ready product, Mr. Totoki answers in rather vague terms.
The technology roadmap is there.
The use of the technology will really be country by country. For example, in Japan, 2020 is an Olympic year — it will be the second Olympics in our history and a very important year for us. Leading up to 2020, the government and major operators would like to demonstrate 5G technology in Japan. That’s the roadmap we have in Japan, and I’m sure other countries will have theirs as well.
Addressing the elephant in the room that adoption of 5G will bring, Mr. Totoki is confident that 5G will not degrade battery life much beyond what it already is.
With 5G technology the interesting thing is that we can increase the usage of the bandwidth and people can enjoy easy access and faster speeds on their network, but we can do this with lower battery consumption. That’s a really interesting aspect.
If you look at smartphones and smartwatches today, many device makers and watch makers are making products, but the battery life is one big pain-point, obviously. Combined with the technological progress of batteries, as well as other technology progression, we will be able to provide a much better experience to the people. And this will develop and expand the business.
Ending the interview, Mr. Totoki address globalization and its impact on business in recent times.
My observation is that many boundaries have disappeared between countries.
There is no segregation of information — those boundaries have disappeared now and we are working for the one economy all across the world. All of us are under one roof.
There are many players, many emerging players, and new companies that can jump into the industry. The world has become flat and competition has become severe. And that’s good for us. We can change the competitive landscape with one new technology, or even one new product.
That’s happening all over the world, and we have to face this reality. We shouldn’t become nostalgic for the way things have worked in the past — we have to see the future and be excited by it.
Indeed, the future is exciting. The first half of 2015 brought along new flagships and pseudo-flagships, new wearables and even Google’s take on IoT. From the looks of it and under the guidance of Mr. Hiroki Totoki, Sony is prepared to take things head on. Here’s hoping that we continue to see more of Sony, from Sony in the future.