Without grand plans for China, U.S., Sony set to lag in smartphones

Reuters

* Sony to remain focused on Europe, Japan markets

* In US only fourth-largest network carries Sony phones

* Mobile devices one of three pillars for turnaround

By Reiji Murai and Sophie Knight

TOKYO, Oct 11 (Reuters) - Kazuo Hirai's plan to restore SonyCorp to lasting profitability rests in large part onits smartphones leapfrogging rivals to become the world'sthird-biggest sellers after the Apple iPhone and Samsung'sGalaxy series.

But that goal remains some way off. Sony's CEO, installedlast year with a brief to turn the serial loss maker around,said on Friday that for now, Sony has no big plans for theworld's two largest smartphone markets, China and the UnitedStates.

Instead, Hirai said Sony, which aims to rise to thirdposition from its current ranking of seventh, will focus onEurope and its home market in Japan, which collectively accountfor 60 percent of its smartphone sales.

"Those two are the most important areas for us and we'll putsubstantial resources there. But not yet for the U.S. andChina," Hirai told a gathering of journalists.

"It's not realistic to try to do everything at once. In theU.S. we'll start gradually."

In the U.S., only the fourth-largest carrier T-Mobile US Inc offers Sony smartphones. Meanwhile, Sony has beenunable to compete in China with homegrown brands from ZTE toCoolPad despite contracts with the three largest carriers.

Sony is not among the top five smartphone brands in eitherof those markets, according to research firm IDC. Its globalshare of the smartphone market was a modest 2.2 percent in thesecond quarter of this year, according to research firm Gartner,trailing the likes of LG Electronics Inc and LenovoGroup Ltd as well as Apple Inc and SamsungElectronics.

Hirai has positioned mobile devices as one of the threepillars for a turnaround of the company's electronics unit,which relied on help from a weak yen to post a profit in thelatest quarter - its first quarterly profit in two years.

The other two key divisions are games, where the PlayStation4 console due for launch next month has drawn strong pre-orders,and digital imaging, where Sony dominates the production ofimage sensors for smartphone cameras.

Against that background, smartphones could end up theweakest link in the strategy.

NOT EXCEPTIONAL

"Their devices are OK but frankly not compelling. They'refine, but they're not exceptional," said Benedict Evans, anindependent mobile and telecommunications analyst based inLondon.

"But the deeper problem is that when you're selling devicesmade on someone else's platform it's extremely difficult todifferentiate."

Even in its home market, where Sony ranked No. 2 in thelatest quarter behind Apple, the outlook has become tougher.Last month Japan's largest carrier, NTT DoCoMo Inc,which in its summer campaign favoured Sony's Xperia over otherdomestic brands, struck a deal with Apple to carry the latestiPhone.

Still, Hirai said the Xperia's established reputation inJapan should help to see off the threat from Apple. "We havestrong brand recognition here for Xperia's hardware andservices," Hirai said.

The company has set a target of selling 42 millionsmartphones worldwide in the financial year to next March, anincrease of 27 percent from a year ago.

In 2012, Samsung shipped 218.2 million Galaxy phones whileApple sold 135.9 million iPhones, according to IDC.

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