Sony warns reforms needed before smartphones make money

Sony Corp President and Chief Executive Officer Kazuo Hirai walks as he leaves a news conference at the company's headquarters in Tokyo September 17, 2014.

TOKYO - Struggling Sony warned Thursday it needs to carry out years of root and branch reform before it can turn around its battered smartphone arm.

The Japanese consumer giant, fresh from revealing a 172 billion yen (S$1.95 billion) operating loss in the mobile communication segment for the latest quarter, said painful changes lay ahead.

"We must carry out structural reform before we can launch a new business," said Hiroki Totoki, new head of Sony Mobile Communications Inc and a Sony group executive.

"Devices with communication functions have the potential to develop further," he told market analysts and reporters in Tokyo.

"We will implement reforms first to build a company structure that allows us to manage certain risks before venturing into the new business and getting a result," he said, adding it would take "years to deeply synchronise technological and product development".

The once-mighty Sony last month announced a 109.1 billion yen six-month loss, the latest in a series of parlous results totalling billions of dollars.

Even the sharply weaker yen, which has plunged to around 118 to the dollar against about 80 two years ago, cannot smooth over the gaping holes.

In any case, analysts warn, the effect of the currency shift is fading and the industry's household names have more work to do on reinventing themselves.

Sony has said it will cut global staff numbers in the smartphone unit by 15 per cent - about 1,000 jobs - and not pay dividends for the first time since its shares started trading in Tokyo in 1958.

The business has been hit by weaker-than-expected results in emerging markets and a full-blooded challenge from global rivals including Samsung and Apple.

Totoki said Tuesday it was "difficult" for Sony to address the low-priced mass market players in the mobile communication business "as we lag behind in cost competitiveness compared with Chinese rivals".

"I think we need to make more use of Sony's technologies. We have great technologies at least in the fields of censors and camera modules," a key component of digital cameras, Totoki said.

The comments came after he was asked about Sony's past failures in focusing on high-end consumers, including its Vaio personal computer business.

The company said earlier this year it was exiting the personal computer business, selling the unit under the Vaio brand - which scored an initial success in the high-end market but later saw its market share dwindle - to a Japanese investment fund.

Sony shares jumped 6.12 per cent to 2,582.5 yen (US$22) on Tuesday.