By Tim Kelly
TOKYO (Reuters) - Sony Corp's bid for revival as a consumer electronics maker this business year will hinge on the fortunes of its latest smartphones, as it struggles with shrinking sales of its TVs, digital cameras and game consoles.
With consumer spending converging on Apple Inc's iPads and Samsung Electronics Co's Galaxy phones, Sony on Thursday forecast smartphone sales to rise more than one-fourth to 42 million in the year to next March. It predicted sales of its digital cameras and Playstation consoles would contract at double-digit rates.
Its five-inch screen Xperia Z smartphone has exceeded the company's sales expectations since its launch in January, but it faces an uphill battle against Chinese rivals and Samsung and Apple.
"It (42 million) does not seem a lot. Its smartphones are high-spec and production costs should be hefty, so the company has to sell a lot to be profitable in the business," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
Boosted by a weaker yen that inflated the value of its euro-denominated sales, and by the expected elimination of losses in its diminished TV unit, Sony is betting on its new smartphone to help it secure an operating profit of 230 billion yen ($2.33 billion) this business year. That compares with the average 210 billion yen profit estimated by 19 analysts surveyed by Thomson Reuters I/B/E/S before Thursday's earnings announcement.
AIMING FOR NO. 3
Sony's boss, Kazuo Hirai, in 2012 identified mobile products, gaming and digital imaging as the core of a rebound in consumer electronics after more than a decade of decline for the pioneer of personal music players and compact discs. Of those three, mobile has since emerged as the best near-term hope for Sony to turn around its electronics business.
Its goal is to fend off challenges from China's Huawei Technologies and ZTE Corp and Korea's LG Electronics to secure the No. 3 slot in the global smartphone market, behind Samsung and Apple which between them account for more than half of all smartphones sold.
The Japanese company, however, will need to cement better ties with carriers in the United States to win market share there and may struggle against its Chinese rivals in their home market, analysts say.
"The Xperia range is selling well where available, but Sony's limited retail presence in major markets like the U.S. and China is restricting its growth," said Neil Mawston, executive director at market researcher Strategy Analytics. "Sony captured less than 1 percent of the valuable U.S. market in 2012."
Strategy Analytics expects the Japanese company to ship 41 million smartphones worldwide in 2013, giving it a 4 percent market share. Sony, which was ranked fourth globally by research firm IDC in the fourth quarter of last year with a 4.5 percent share, fell out of the top five in the January-March quarter.
ASSET SALES, MOVIES AND INSURANCE
Sony bounded back into the black last year with a profit of 230.1 billion yen that was bolstered by earnings from the sale of office buildings in Tokyo and New York, the revaluation of stock holdings and gains from the sale of businesses including a chemical unit.
"Selling assets wasn't just about helping our balance sheet. It is part of a strategy to revamp our business portfolio," Masaru Kato, Sony's chief financial officer, told a news briefing.
Financial services - mainly its insurance subsidiary - posted an operating profit of 146 billion yen, making it the consumer electronics company's most profitable business. Movies and music combined added a further 95 billion yen to profit.
This business year, the squeeze on Sony's traditional consumer electronics gadgets is set to continue. The maker of Bravia sets forecast sales of televisions to rise to 16 million this business year with the division seen returning to profit, after a sharp drop last year to 13.5 million. It had made 19.6 million TVs in the year to March 2012.
Digital camera sales are forecast at 13.5 million this year, a 20 percent drop, while its handheld game consoles, the PSP and PS Vita, are projected to fall nearly 30 percent to 5 million.
Since the start of the year, Sony's shares have gained 82 percent compared with a 37 percent rise in the benchmark Nikkei average. Its shares fell 1.4 percent on Thursday to close at 1,744 yen before it released its latest earnings results and forecasts.
($1 = 98.8200 Japanese yen)
(Additional reporting by Jonathan Gordon in Hong Kong and Ayai Tomisawa in Tokyo; Editing by Edmund Klamann)