Like LG, Sony’s smartphone division is now also doing quite well:
In the three months between April and June of this year, Sony saw both a “significant increase in unit sales” of its Android smartphones and an improved average selling price per handset. That’s at the heart of the company’s improved profitability.
The common parlance that only Samsung is profiting off Android is, as I’ve said before, simply no longer true. All it took for companies like LG and Sony to become profitable with Android is to, you know, stop making crap phones, and start producing good ones.
Shocker.
35 Million? Partly because of weaker Yen.
When its stronger and consultant then I will believe it.
When you set up a strawman such as “only Samsung is profiting off of Android” its easy to disprove it by posting meager profits.
The spirit of the argument has always been that only Samsung was making any meaningful profits, and their share as a percentage of profit was astronomically high thanks to its vertical monopoly. Samsung crowds out every other OEM.
http://blogs.strategyanalytics.com/WSS/post/2013/05/15/Samsung-Capt…
This is for Q1, but quite obviously not much has changed. Its great that Sony posted a profit, as they’ve been restructuring and on a downturn for a while, but this doesn’t prove anything except a completely made up assertion that every other Android OEM was making zero profits.
Edit: I’ll also (once again) ask you to break down the profits derived from handset sales specifically. It doesn’t look too hot for Sony.
Edited 2013-08-01 10:20 UTC
The “no one but Samsung profits” argument is often offered as a reason why others should abandon Android and do something else (often Windows Phone). This shows that Android can be a path to success for more than just Samsung. The most relevant consideration is Sony’s profits with Android vs what they could likely make without it, not Sony’s profits vs the market leader. By that logic, there should never be any local restaurants because they don’t generate even remotely as much profit as the big chains.
Often? I’ve never seen this argument made at all by anyone who wasn’t a halfwit (I can only think of a tiny number of Microsoft fanboys who can’t accept that the company has missed the boat repeatedly for the last decade)… that didn’t require clear evidence that Samsung is relatively the only one benefiting from using Android (and again, as per below, even then I wouldn’t be convinced that Samsung’s success is a direct result of Android — rather than manufacturing, resources, marketing, and strategic causes.)
However… as to your point of only comparing their own success with Android versus their own success without Android (a point I don’t agree with — hell, we could compare these billion dollar technology companies to some restaurants and show that Android doesn’t help profits — but I think worth considering): the data is very much clear that Android has had essentially no positive impact whatsoever on any company’s success (excepting the possibility of Samsung). 99.9% of mobile manufacturers are still generating losses, barely breaking even, or occasionally posting inconsequential profits. If anything, we can look at a few companies who have fared worse as a result of Android (HTC, for example).
Edited 2013-08-01 13:21 UTC
Following your reasoning, how could Samsung compete without a good (enough?) mobile OS to use? Do you think should it pick MS mobile OS, and selling the volume they do, would Microsoft ask a little as it does now? I don’t think so, and it, very probably, would have a big impact on Samsung net profit. I am not implying you, somehow, left this scenario tacit, it was only to illustrate one possible alternative and to leave, beforehand, an argument to the ones that fall toward this.
I think it is clear to everybody that carriers have a large impact on what is available to consumers and that Samsung has a very good business relationship with most of them (read incentives and availability), together with their product quality, it make consumers very inclined to get them. The first is precisely what small manufactures lack (may lack quality too) and the last is what some known brands did not have for some time (and would lack the “proximity” Samsung has too). It is really a big game and Samsung has the quality and the resources to play it well.
And how it can tracked to Android on this case and not on HTC business practices?
It seems to me that only now the big manufacturers companies that can play this game are getting their acts straight, i.e. Sony, LG and some others and we will see a more competitive fight for sell.
Also, I very much doubt that carriers and manufactures would like to repeat the scenario we had with PC computers where only Microsoft was making “good” money while everyone else were retorting to whatsoever they could to improve their profits. Fool me once, shame on you; fool me twice, shame on me.
This is what makes me astonished by Nokia move. They had the quality, the presence, the relationship and the brand, yet they opted to play a risk game. Not a wise choice if you ask me. Again, I am not saying that they should not produce phones with MS OS, only that putting all its eggs on one basket is rarely a smart move, even more if you take account on MS business practice history.
Edited 2013-08-01 14:32 UTC
Did you actually read my comment above? Clearly not…
My point being: whether or not Android did exist, they would likely tower over every other OEM excepting Apple. Android might benefit Samsung in relationship to competing with Apple, but that benefit may or may not exceed the benefits of their manufacturing prowess, component integration, cost efficiencies, carrier relationships, massive product lines covering all possible needs, markets, and costs, massive advertising budget that dwarfs virtually any other across all industries, and innumerable dirty tricks. Might. However, the complete lack of any evidence whatsoever that anyone else is actually benefitting at all (potentially or demonstrably) rather than being in the same poor shape, or even worse, doesn’t turn those mights into a demonstration that Android is the source of benefit to the market place.
If you read the whole paragraph you would see that I did.
Anyway, my point was, if not for Android, most of “wanna be” smartphone manufactures would not exist today (but would in future if the other projects mature enough).
Also, I said that the success of Samsung can not be derived of Android factor only as also can not the lack of it by other manufactures. Success is a combination of opportunity and competence at right time and most of the competitors were not ready when the smartphone boom started.
Edited 2013-08-01 16:29 UTC
There is no way you could have been reading my comment if you think I was recommending Windows Phone as an alternative.
Further, I don’t need to argue that absent Android things would be worse or similar. All I need to argue is that Android is not benefiting anyone outside of Samsung (and even then it is arguable).
Edited 2013-08-01 16:53 UTC
Fair enought, this is what I posted about your comment and about MS OS use.
I think its a fair point, and it would depend on what consumers gauge as being “good enough”.
Does Windows Phone not sell because its not “good enough” or because of structural inefficiencies in the market brought on by Samsung’s dominance and Android’s mindshare? Is it an awareness problems or are people who pick up Windows Phone’s genuinely disliking them?
As is the case in a lot of things, I suspect the answer is a little of everything. Some people surely dislike Windows Phone, some find it too limiting, others think the app situation at the moment is a bridge too far, but others (and I’d argue a sizeable majority) of them are just not aware of it.
Therefore, it becomes in my opinion difficult to answer the question of whether Samsung could do okay by exclusively pushing Windows Phone. A company with the size and marketing power of Samsung could sell anything to anyone and make great profit on it. They control everything along the way from the chips to the screens.
I also similarly think its difficult to judge Android based off of how Sony, LG, and the other bottom feeders do. It isn’t a problem tied to Android, but it is a problem tied to Samsung.
A Windows Phone buyer is making an explicit choice, and Nokia has an easier time standing out in that crowd. An Android buyer for say an HTC One still has a very hard decision to make because a Galaxy S 4 for example is still compelling in my opinion.
Samsung could plausibly at any moment sweep in and upstage Nokia in Windows Phones and wipe them out, but I don’t think they are particularly interested in it now — and in the future if Windows Phone ever grew to the point where it became interesting, Nokia would presumably have a stronger foothold and more mindshare to make it a fight worth having.
That’s my read of the situation at least.
The real question is: how did Sony ship 10 million very expensive smartphones and barely avoid a loss, while Samsung and Apple are counting their profits in the billions?
Sony would have had a better return if they had put the money in some random common high street bank offering a below inflation interest rate. If you aren’t beating inflation your actually making a loss. This is the reason people say that only Apple and Samsung are making meaningful profits.
Edited 2013-08-01 12:34 UTC
One could alse note that they are all simply hurting from paradigm shift brought by Apple.
W/O Android they would all either be out of smartphone business or additionally paying licence fees (which would probably be higher due to lack of competition) to MS.
You don’t count the the indirect benefits in gaining experience in building competitive touch phones, customizing the OS, integrating with their own value added services.
They are still in the game, that’s what counts.
…which is miles from the thesis of Thom’s article.
If the article was, “Sony avoids dying because of Android,” I’d say this quarter’s financials are far from proving that, but that’s not remotely the point.
So it’s not an argument worth addressing (one that wasn’t raised and is a hypothetical based on an alternate history — comparing how they’d perform if Android did not exist).
Edited 2013-08-01 15:05 UTC
For-profit companies are not in business to stay in the game. They are in business to make a profit. This is what distinguishes them from non-profit organizations. At least, that’s the theory.
So yes, the smartphone makers can stay in the game. But to what end? If they don’t make a real profit, then what did they invest all that capital for?
It is quite possible for an industry to reach a competitive equilibrium in which most of the players never make any money. The American airline industry is the classic example. Over its entire history, aggregate industry profits have been negative.
Granted, some of the smartphone companies have no choice but to stay in the game. For example, if you take away smartphones, then there’s basically nothing left of HTC. But others — like Sony — do have a choice of where to deploy capital. Sony consistently makes money on life insurance.
The only reason to stay in an unprofitable market is if you think the present situation is temporary. The problem is that all the smartphone makers are staying in. This competitive pressure drives prices down, and ensures that most of them won’t make any money.
Edited 2013-08-01 18:30 UTC
BWAHAHAHAHAHAHAH! You haven’t actually looked at either companies financials, have you?
In the case of Sony, it very much is true. For a few minor companies (which now include LG even though they do large volumes), it may be false (but still highly debatable — even being a marginally profitable Android builder doesn’t tell me that Android itself is the source of the profit), but relative to Samsung and Apple, it is still very much true. For the majority of large smartphone brands, it is still very much true. Quarter after quarter after quarter of losses, maybe breaking even, maybe the odd quarter here and there with completely and utterly inconsequential profit (about a candy bar or magazine worth of profit on a $400-600 dollar item).
Indeed.
Edited 2013-08-01 13:00 UTC
You clearly have no idea what you are talking about, nor have you read or understood the Verge article.
Sony expects a profit for the whole fiscal year, quoting the article: “a second consecutive year of being in the black.” That is not possible if you have “Quarter after quarter after quarter of losses”.
I had read the source Sony document before I read either The Verge article or this one. The Verge article parrots Sony’s PR speak. I’ve fully understood all 3 materials.
And that’s for the whole business. And includes the benefit of favorable foex which was given just as much importance by SONY THEMSELVES as increased smartphone sales. And that “in the black” is still marginal. And that marginal “in the black” doesn’t negate numerous quarters of being in the red.
Look, you’d have to use a log scale to make this “profit” even show up on a graph that includes Apple and Samsung… even then it would be tiny. And that chart would have to start now and ignore 5 years. And it would have to ignore the fact that 4 other industry “leaders” are doing just as bad or much worse.
Edited 2013-08-01 13:38 UTC
Ah, I now see where your remark is coming from. Nobody disputes that Samsung and Apple make much more profit that Sony, or that Sony made a substantial loss in the past.
What you wrote however suggests that the profits appear just in “the odd quarter here and there”, which is not true. Sony sees itself in a profitable year.
EDIT:
And this is why I think that you have no idea what you are talking about:
The financial statements are on record. Sony can’t just make up stuff and write it in there. If something in that statement turns out to be false, then Sony will be in trouble with the SEC.
Edited 2013-08-01 14:15 UTC
No, you still misunderstand. Yes, Sony has most assuredly had more quarterly losses in smartphones alone than they’ve had profits over the last 5 years. But, yes, my point is greater than this detail.
I think you failed to make your point then since chithanh prove wrong what I was before believing was your point.
Yes, and as I said, I’ve read them. Nowhere does Sony say that smartphones alone are profitable. We have a P/L statement for the entire mobile division showing utterly inconsequential “profits” and a comment that their total performance for this quarter was more favorable than expected based on favorable foex and improved smartphone performance (no word on whether that improved smartphone performance is slightly better than bad results, less loss than previous quarters, etc).
Then read again. Here is an indicator: “This significant improvement was primarily due to the above-mentioned increase in sales of smartphones.”
Yes, that is Sony’s spin on the news. The numbers, however, say something quite different.
From Slide 3 of Sony’s quarterly results presentation:
http://www.sony.net/SonyInfo/IR/financial/fr/13q1_sonypre.pdf
Mobile Products & Communications (MP&C)
Sales: 389.0 billion yen
Operating income: 5.9 billion yen
FX impact: +62.4 billion yen
Notice that “FX impact” was over 10 times the operating income. In other words, if the yen had not dropped 20% against other world currencies, Sony would have turned in an operating loss of 56.5 billion yen in the mobile division.
Would you consider a profit margin of -14.5% to be “doing quite well?”
Note: The MP&C division at Sony also includes personal computers.
Edited 2013-08-01 18:46 UTC
That something is labeled as “FX impact” doesn’t mean that it is somehow unexpected or unpredictable, or that it is totally independent of the other listed items.
Yes, and as various others have already noted, it is much more plausible that the smartphones hide losses in the PC department than vice versa.
“That something is labeled as “FX impact” doesn’t mean that it is somehow unexpected or unpredictable, or that it is totally independent of the other listed items.”
It does mean it is completely unrelated to how Sony as a business or any of its products are performing.
Think about that. Uncontrollable, sometimes random, global economic effects were more beneficial to Sony’s business this quarter than anything they tried to control.
Yes, profits are good, loses not. That it always can be more profits isn’t any argument, its a shared agenda that applies as well to Samsung and Apple, always.
Sony grows, makes profits in a highly competative market, in an increasing important market. They reentered late, got there acts together and already passed the likes of Nokia and actually make PROFIT while continue to grow. That’s what I name healthy, a perspective, something to build up on, a future.
Edited 2013-08-02 16:56 UTC
Yes, and this is in the individual breakdown for the Mobile division, which is more than smartphones. But the foex benefits were greater and cannot be pinned down to a single divisional unit (it has to be spread across all the divisions).
So… What is this an indicator of? Other than your poor understanding of the financials and your grasping at straws?
Just yesterday I saw a little girl in the bus using a XPeria phone. A friend of mine bought one (later replaced by an iPhone and his girlfriend got the XPeria).
And more, I that own a Samsung Galaxy 3/Apollo (i5800) am planning to buy a XPeria myself, because of Sony changes to Android policy (open bootloader tools, support for CyanogenMod) and mostly of all: hardware quality.
I had a Sony Ericsson dumbphone before, it was rock solid, it is still working better than my Samsung Android phone. XPeria phones look really, really solid, contrary to Samsung ones. Plus, the colored bar light effect seduces.
So, this is no surprise, they really have a good product line and are increasing sales.
From the article title:
All it took for companies like LG and Sony to become profitable with Android is to, you know, stop making crap phones, and start producing good ones.
From the original pdf:
Operating income of 5.9 billion yen was recorded, compared to an operating loss of 28.1 billion yen in the same quarter of the previous fiscal year. This significant improvement was primarily due to the above-mentioned increase in sales of smartphones. Operating income during the current quarter included a benefit of 7.0 billion yen due to the reversal of a patent royalty accrual.
Without that “reversal of a patent royalty accrual” they would have still made a loss