Bloomberg News

Sony Bets on Xperia Z1 to Pass LG in Smartphone Race

September 05, 2013

Sony CEO Kazuo Hirai

Kazuo Hirai, president and chief executive officer of Sony Corp., presents the new Sony Xperia Z1 smartphone and an attachable lens style camera for smartphones on an event ahead of the IFA, one of the world's largest trade fairs for consumer electronics and electrical home appliances in Berlin, on Sept. 4, 2013. Photographer: Markus Schreiber/AP Photo

Sony Corp. (6758) is betting its Xperia Z1 handset will propel it to No. 3 in the smartphone market, leaping from seventh place by vaulting past competitors such as LG Electronics Inc. (066570) and Lenovo Group Ltd. (992)

The Xperia Z1, which comes with a 20.7 megapixel camera and will be in stores this month, will help it gain ground in the U.S. and China to become the biggest rival to Apple Inc. (AAPL:US)’s iPhone and Samsung Electronics Co.’s Galaxy devices, said Dennis van Schie, Sony Mobile Communications sales chief. The company also announced a zoom lens-style camera for smartphones.

“Our ambition is to become a top three player,” van Schie said in an interview at the IFA consumer electronics show in Berlin yesterday. “We are, right now, enjoying fantastic momentum in the markets where we play. We are breaking into the U.S.; we are building momentum in China.”

Sony has its sights set on a market dominated by Samsung, which controlled a third of smartphone sales globally in the second quarter, according to research from Gartner Inc. The Tokyo-based company doesn’t rank in the top five, according to data compiled by Bloomberg. Apple, which is unveiling its new iPhone next week, has 14 percent of sales. LG, Lenovo and China’s ZTE Corp. (000063) round out the leaders list.

“Sony has done a good job to differentiate itself from others,” said Junya Ayada, an analyst at Daiwa Securities Group Inc. in Tokyo. “If Samsung does not introduce new smartphone in the second half of this year, I think Sony can continue to enjoy its momentum toward the end of this year and expand its global share.”

Shares Gain

Shares of Sony rose 0.8 percent to 2,076 yen at the close of trade in Tokyo. The stock has more than doubled this year compared with a 35 percent gain in the Topix index.

Sony is gaining in Europe with cheaper handsets, according to Kantar Worldpanel ComTech. Still, the Xperia Z1, which uses Google Inc.’s Android operating system, points to Sony’s aspirations to the more profitable premium market dominated by Apple and Samsung. The maker of Bravia televisions and PlayStation game consoles is playing to its strengths with image sensors in its smartphones, and it often notes water-resistant features to draw customers willing to spend more.

The company unveiled its first lens-style camera featuring optical zoom and an image processor. The device can take pictures on its own and also attach to smartphones, including Sony products and Apple iPhones, the company said.

‘Turning Around’

“While many of our competitors are struggling for their survival, we are turning around, we are delivering according to plan,” van Schie said. “For us, the growth mode is there, also in the high-end segment.”

Sony’s larger competitors are also unveiling new devices to stay ahead. Apple sent out invitations this week to a Sept. 10 event at its Cupertino, California headquarters to debut more models of its top-selling product, the iPhone, a person familiar with the plans has said.

Samsung hosted an event yesterday at the Berlin show featuring a live orchestra to introduce the Galaxy Note 3, a smartphone-tablet combination with a 5.7-inch screen and exterior of patent leather-like plastic. Unlike Apple and Sony, the Note uses a stylus pen for many functions and retooled Android software to ease multitasking.

Microsoft Corp. this week agreed to spend 5.44 billion euros ($7.2 billion) to buy Nokia Oyj (NOK1V)’s handset unit so it can gain ground on Apple and Android devices after lagging behind its rivals in smartphones and tablet computers.

Sony’s device division generated operating profit of 10.9 billion yen ($110 million) in the June quarter with most of the earnings generated by sales of chips, Deutsche Bank AG estimates. The division was the biggest source of profit after its insurance business.

“The Xperia Z1 is truly a watershed moment in Sony’s history,” Chief Executive Officer Kazuo Hirai said at the press conference introducing the new smartphone.

To contact the reporters on this story: Manuel Baigorri in Berlin via mbaigorri@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net; Cliff Edwards in Berlin via cedwards28@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Anthony Palazzo at apalazzo@bloomberg.net


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