Sony Mobile: what Investors and Customers should know...

If Sony Mobile doesn't turn around consumer confidence, how do they expect to turn around their company's profitability?

In October 2014, Sony announced an annual loss of $1.2 billion, due to its ailing Mobile (phones, tablets) devision. As a consequence, it will not pay a dividend to its investors, for the first time since stocks were traded in 1958.

Also in October, a majority of Sony Xperia smartphone customers found themselves alienated by the company, as the service pages of their devices announced that they would receive no further Android firmware updates.

This must be the first visible effect of the restructuring announced by Sony President and CEO Kazuo Hirai, involving a 15% reduction in staff at the Sony Mobile devision (down 1,000 from 7,100).

Sony Mobile once held third place, behind Apple and Samsung, in the global smartphone market.

It earned this place due to its "DNA" - of better than average build, reliability, and durability - originating from Swedish telecom firm Ericsson, from which Sony essentially bought its Mobile devision.

But in the smartphone world, reliability and durability are determined by two equally important factors: hardware, and software.

The core of Android software is developed by Google. And it is being developed at a rapid pace. It began with Android 1.0 in 2008, and this year (2014) Google has announced Android 5.0. They are giving each version not just a number, but also a catchy name. Current Android versions 4.3 and 4.4 are called "Jelly Bean" and "Kitkat", and version 5.0 will be called "Lollipop".

Hardware manufacturers, like Sony, but also Samsung, HTC, LG, and what have you, adapt each new Android version to their hardware, i.e., to every particular smartphone model they produce. This is then called the "firmware" for a particular phone.

Typically, the smartphone hardware will last about four years. In that time frame, Google will have issued several Android updates. These will accommodate new hardware capabilities, but also new software developments, and - very important for older hardware - address security issues, preventing hostile hackers from taking control of your phone.

So, for the lifetime of their phone models, manufacturers provide firmware updates to their customers, each time Google issues a new version of Android.

Apparently in an effort to reduce costs, in October 2014 Sony Mobile have decided not to provide firmware updates for their budget and midrange phones from 2013 and earlier anymore, affecting the majority of their customers.

Many 2013 models are still being sold in official national Sony web shops around the world, at the time of writing of this blog (November 2014).

Knowing they will receive firmware updates throughout the life time of their hardware, i.e., for at least two years after the last phone of a particular model is shipped, is very important for the customer's perception of reliability and durability of their smartphone.

This is where, since October 2014, Sony is letting down their customers severely. On internet forums, including Sony's own user forums, in response to this move, many customers have indicated they will never buy a Sony smartphone again.

President and CEO of Sony, Kazuo Hirai, has indicated to investors that the Mobile devision is important and will be turned around to make a profit.

To make this happen, he has appointed senior vice president Hiroki Totoki to be the new president of Sony Mobile Corporation as of November 16, 2014.

Mr. Totoki faces the tough job of restoring consumer confidence. To do this, he will have to  understand and acknowledge the two unique selling points of Sony smartphones: better than average hardware, and better than average software (support).

Which means that owners of 2012 and 2013 Xperia models should soon see Android 4.4 (Kitkat) and 5.0 (Lollipop) "under investigation" on de company's service pages again. And this time expecting delivery of the new firmware within three months, rather than finding Sony has abandoned them, with the statement that Android 4.3 (Jelly Bean) is the final update for their phone.

If Sony Mobile doesn't turn around consumer confidence, how do they expect to turn around their company's profitability?

Sources: Reuters, Sony Investors Relations.