Sony will be holding its investor relations event in Tokyo on Nov. 25, where big investors and financial analysts will gather and mull over whether Japanese electronics company's management team is equipped to cure its troubled electronics arm.

Unsolicited advice, already circulating among Sony watchers, ranges from shutting down the mobile division to dumping PlayStation before game consoles fall completely out of fashion.

Chopping off business units that aren't making money is a logical step. But this is precisely the sort of decisive action that big Japanese corporations—which like being big—hesitate to take. However, Sony is the rare Japanese company with a record of bold decisions. It got out of the PC business this year. It spun off its TV unit last summer. The popular sentiment among investors now is that Sony should do the same with its smartphone business.

Of course, the negative talk about the mobile business is partly Sony's own doing. Its recent downward revisions to targets for its smartphone business haven't inspired investor confidence. In July, Sony cut its smartphone sales target for the fiscal year through March 2015 to 43 million units from an initial target of 50 million. In September, Sony trimmed the forecast again to 41 million. Sony now expects its annual net loss to exceed $2 billion after writing down the book value of its mobile unit.

If leaders of the mobile unit—one of Sony's three main pillars, as declared by CEO Kazuo Hirai—couldn't accurately read the increasingly cutthroat global smartphone market, why should anyone trust Sony management?

Second, the company's midrange plan for its mobile business is baffling to some. In announcing the September downward revision, the company said its revised strategy calls for it to "reduce risk and volatility, and to deliver more stable profits." But a business strategy of lower volatility and steadier profits runs completely opposite to the very nature of the smartphone market.

The mobile business is "a scale game," as Robert Armstrong, head of LEX columns at the Financial Times, explained in a video clip. "If they can't grow rapidly, and if they can't scale up and protect margins, they are never going to make money. They should put this business down."

The mobile business would require a lot of resources to compete with all types of phones—lower-end phones running the Android operating system and higher-end phones like iPhones, Armstrong said. Since Sony isn't paying an interim or full-year dividend this year for the first time in its history, it's fair to assume that it lacks the resources to stay in the smartphone business. At least, "it wouldn't be a gamble Sony is prepared to take" right now.

Surveyed industry analysts and veteran Sony watchers on the mobile quandary,found opinions sharply divided.

"The answer isn't as clearcut as get[ting] out of the handset business," said Wayne Lam, senior analyst for telecom electronics at IHS Technology. "For the long-term viability of Sony, they can't afford not to get their mobile solution right."

It's important to keep the performance of Sony's mobile business in context with historical performance relative to its peers, he said.

By: DocMemory
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