Sony’s troubled smartphone unit reported a sharp decrease in sales, which the company said was the result of “a strategic decision not to pursue scale in order to improve profitability”.

The Mobile Communications business saw an operating loss of JPY22.9 billion ($184.42 million) in the company’s first fiscal quarter, compared with a loss of JPY1.6 billion in the year-ago quarter, on revenue of JPY280.5 billion, down from JPY335.0 billion.

The company said that when it comes to its loss, lower sales and higher restructuring charges were offset by reductions in marketing and other expenses, as well as improved product mix. But it was also impacted by foreign exchange movements, due to its high ratio of US dollar denominated costs.

Smartphone shipments
Smartphone unit shipments for the quarter was 7.2 million units, down from 9.4 million in the prior year (and from 7.9 million in the prior sequential quarter).

And the company also revised down its forecast for the unit, “primarily due to an expected decrease in smartphone sales”. Although higher than anticipated selling prices of smartphones and additional cost reductions are expected to offset this to some degree, its operating loss will be impacted by the negative impact of foreign exchange rates.

Full year smartphone unit shipments are now forecast to be 27 million units, compared with an earlier forecast of 30 million, and with full-year sales of 39.1 million in the year to end-March 2015.

On a group level, the company reported a profit attributable to shareholders of JPY82.4 billion, up sharply from JPY26.8 billion year-on-year, on revenue that was flat at JPY1.81 trillion.

The company saw strong operating income growth in its Game & Network Services business driven by its PlayStation 4 activities; and a strong growth in its Devices (semiconductors and components) unit, benefiting from sales of imaging sensor for mobile products.

Sony Music also benefitted from a revaluation of its equity interest in The Orchard, an independent music, video and film distribution company of which it recently took full ownership.

However, its Pictures unit suffered due to lower sales for Motion Pictures, due to a decrease in theatrical and television licensing revenue.