Sony to Spin Off Smartphone Division, Focus on Gaming and Media

February 19, 2015
By: Tara Seals

Sony expects to boost operating profit 25-fold within three years, primarily on the back of its one remaining marquee consumer product: the PlayStation gaming console. Meanwhile, it will spin off its remaining audio and video business into a wholly owned subsidiary.

The PSP, media and selling camera sensors to Apple will sustain the formerly formidable consumer electronics giant, according to CEO Kazuo Hirai. He noted that cheaper Asian rivals, Apple and Samsung (News - Alert) effectively dominate the smartphone scene, while Sony instead has a leadership role when it comes to video games and entertainment. Thus, the company will restructure accordingly.

Sony aims to post an operating profit of at least $4.2 billion for 2017/18. But the news comes as the Japanese powerhouse forecast its sixth net loss in seven years for the upcoming financial year. Last year, it decided to spin off the company's TV business and sell its VAIO personal computer unit.

"The strategy starting from the next business year will be about generating profit and investing for growth," Hirai said, noting that if ultimately TV and phones prove to be unprofitable, he would not "rule out considering an exit strategy” altogether, he said.

Image via Shutterstock

For now, the TV and smartphone subsidiaries would have plenty of autonomy.

“Each business unit will be more flexible and speedy in making business decisions and will be asked to be more responsible for what they do,” said Atsushi Osanai, an associate professor at Waseda Business School in Tokyo, speaking to the Wall Street Journal. “A challenge for Mr. Hirai is to make sure these spun-off segments remain coherent as one Sony group.”

Hirai introduced the slogan One Sony in 2012, indicating that he planned to unite the company’s wildly disparate business arms.  Last year, he rejected a proposal by New York hedge fund Third Point LLC for a partial spinoff of Sony’s entertainment businesses—a division that has been a growth engine for company even as legacy businesses like PCs and TVs faltered. And now, Hirai said that One Sony is approaching fulfillment, considering that the entertainment side of things (movies, TV and music) can drive interest in its remaining hardware holdings, especially the PSP.

Under the new structure, Hirai noted, “there will be a good balance between centrifugal and centripetal forces.”

Edited by Maurice Nagle