Sony sees $2.1B loss for fiscal year as mobile woes take a toll

The situation is so bad that Sony is suspending its dividend -- the first time it won't be making a payout since it listed in 1958.

Tech Industry
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Sony CEO Kazuo Hirai must figure out how to make mobile profitable. CNET

Sony's envisioned comeback in the mobile business has hit a snag. A big snag.

The Japanese electronics conglomerate warned Wednesday that it will post a loss of 230 billion yen ($2.1 billion) in its fiscal year that ends March 31, 2015. It also suspended its dividend -- the first time it won't be making a payout since it listed on the Tokyo Stock Exchange in 1958.

The company blamed the "competitive environment of the mobile business." Sony has been hammered by competition and an inability to find distributors in key markets such as the US. While its line of high-end Xperia smartphones have been praised for their design and waterproof bodies, they continue to fall under the shadow of giants Apple and Samsung. Sony's problems underscore the hyper-competitive environment that smartphone makers face -- with similar struggles facing HTC and others.

Sony said the losses are a result of a writedown of 180 billion yen ($1.67 billion) in its mobile business and will result in the overall company's fifth annual loss in six years. It also marks a rough year for CEO Kazuo Hirai, who took the reins in 2012 with a vow of turning the business around.

Sony plans to change its mobile strategy by concentrating its efforts in "certain geographical areas, premium lineups and reducing the number of models in its mid-range lineup," the company said in a statement (PDF).

The company had reported a net profit of around 25.7 billion yen in the April-to-June quarter due to blockbusters such as the "Amazing Spider-Man 2" and strong sales of the PlayStation 4 console.

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The Xperia Z3 has won critical praise, but may get overshadowed by its competitors. CNET

But going into the critical holiday-shopping season, there remain a lot of questions about Sony's mobile business. While its Xperia Z3 flagship is making its way into the US through T-Mobile, Sony doesn't have any other US partners for distribution. The company has resorted to selling unlocked versions of its smartphones through its retail stores and website. Beyond T-Mobile, Sony only sells its Z2 tablet through Verizon Wireless.

While Sony plans to focus on its premium lineup, there are questions about whether the company can compete in that category. Apple's iPhone 6 and iPhone 6 Plus are launching on Friday, and Samsung's Galaxy Note 4 is set to hit stores in October. Beyond Apple and Samsung, rivals such as HTC and LG are also fighting for a share of the high-end pie with their respective flagship smartphones. On top of that, companies such as Google and Microsoft are laying out plans to broaden their reach into the emerging markets with more affordable smartphones -- the fastest growing segment of the business.

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