Ratings agency Fitch doubts that electronics giant Sony can turn around the struggling fortunes of its mobile phone division. Sony says it will launch even ‘smarter’ so-called smartphones and a new range of high-end consumer devices. But the news might be a last throw of the dice and follows on from a massive Sony write-down of $1.65 billion, largely because of its lacklustre performance in its cellular division.
Fitch Ratings say that Sony’s revised strategy to focus on premium mobile products in key is better than trying to compete globally in the mid-range smartphone market. “However, a lack of scale means it will struggle against the big two, Apple and Samsung, and will also face competition in the premium market from LG Electronics, HTC and Nokia,” the agency warns in a note to clients.
Not helping Sony (or Apple and other high-end manufacturers) is the clutch of low-cost Chinese units from the likes of Lenovo and Huawei. Fitch warns that these players are forcing mainstream phone manufacturers to lower selling prices and cut margins.
On the upside for Sony, Fitch says the write-down was largely expected and would not further impact Sony’s credit rating. “Our assumptions about Sony’s mobile business profitability and cash generation have been consistently lower than those of management, given the competitive nature of the smartphone market and Sony’s struggle to achieve the scale required for this business to be a success,” states Fitch.
There was one sting in the tail of Fitch’s report, and it concerned Sony’s plans – and hopes – for its TV business, now spun off into a self-contained unit. “We rate Sony’s chance of meeting its break-even target for TVs in the year ending March 2015 at no greater than 50 per cent.”