Cheap Chinese Smartphones Forces Sony Corp (ADR) (NYSE:SNE) To Axe More Staff

Fierce competition in the smartphone industry is to force Sony Corp (ADR) (NYSE:SNE) to lay off another 1,000 staff from the mobile unit as the company looks to streamline its operating costs amidst declining returns. The giant electronics company is letting go more employees in the hope that this will result in a catalytic improvement of earnings, on the smartphone front.

Impact Of Cheap Chinese Handsets

Sony Corp (ADR) (NYSE:SNE)’s smartphone woes in China are in contrast to Apple Inc. (NASDAQ:AAPL), which is enjoying one of the finest runs in terms of unit’s sales in the country. Samsung is also feeling the impact of cheap Chinese handsets having posted a fifth consecutive quarter of declining earnings.

Sony is planning to shrink its workforce by nearly 30% to 5,000 by the end of the current fiscal year through March 2016. The company is to shed more light on its imminent restructuring plan on the release of its earnings on February 4. Stiff competition from Chinese handsets may also sink Sony Corp (ADR) (NYSE:SNE) to an impairment loss of $1.5 billion in the smartphone business.

Earnings Sentiments

Sony Corp (ADR) (NYSE:SNE) is, however, unlikely to miss earnings on its earnings considering it has been doing well on its image sensors and gaming businesses. Going forward, the company hopes to start generating profits in 2016 at the back of the restructuring efforts.

The giant electronics could sell up to 41 million handsets this year slightly fewer by 9 million compared to the initial target, but higher than last year’s 39 million. The company is also looking to partner with major carriers in key markets of the U.S. and Japan as one of the ways of ensuring sales target are met.

Focus also shifts to high value-added models, which can generate impressive returns on strong demand. The smarthome space is one of the areas that Sony Corp (ADR) (NYSE:SNE) is closely eyeing as it hopes people start using its smartphones for controlling equipment and home appliances.