Unify the Empire
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
On June 24th AT&T (NYSE: T) launched Sony’s (NYSE: SNE) first LTE smartphone for the US market, the Xperia Ion. The Ion has a $99 price with a two year contract from AT&T and is running Google's (NASDAQ: GOOG) Android 2.3, Gingerbread. The Gingerbread operating system is a large draw back at this point. Android 4.0 Ice Cream Sandwich has been out for some time and yet Sony is still releasing a new phone running an older version of Android. The Ion’s interface is heavily customized to try to bring some of the Ice Cream Sandwich features to the phone without having ICS. Other than a dated operating system, the Ion is rocking a 4.6 inch 720p screen, 12 megapixel rear facing camera, 1.5 GHz Dual core processor and 16 GB of embedded memory. The Ion is PlayStation certified meaning it will be able to download and play a number of classic PlayStation games. It also features Sony’s Music Unlimited and Video Unlimited services. Unfortunately the Ion will not be enough to reinvigorate Sony’s lagging Android Smartphone sales.
Since February Sony has been making smartphones under its own brand after acquiring the other 50% of its joint smartphone venture, Sony Ericsson, from Ericsson. ABI Research reports that for the first quarter of 2012 Sony shipped 7 million smartphones. This puts them behind Research in Motion and just barely ahead of the Chinese smartphone maker Huawei. In the last quarter of 2011, the then ending Sony Ericsson joint venture swung to a 317 million dollar loss sighting intense competition. They did note a 67% year over year increase in sales of the Xperia line of Android smartphones. Sony earlier this year launched its new Xperia NXT line of Android smartphones which it hopes will finally see its phones catch on.
Sony now offers a full suite of Android smartphones with the low end Xperia U, the mid ranged Xperia P and the high end Xperia S. Last month Sony also launched the Xperia Miro and Tipo, both lower end Android smartphones featuring Android 4.0 and 800 Mhz processors. With rumors of another wave of second generation Xperia NXT phones launching later this year; it is clear that Sony has embarked on a strategy of widening their smartphone line, especially at the mid and low end.
But there is already great competition in low end devices, the Samsung Galaxy S, a very popular phone when it launched a few years ago, is still being sold and the price is very competitive. The same is true for HTC phones and even Apple’s (NASDAQ: AAPL) iPhone 3GS is being offered from AT&T for free with a new two year contract. Sony also faces stiff competition from manufacturers like ZTE and Huawei, who are making a name for themselves by selling budget Android devices and have plans to launch internationally in 2012.
Sony needs a bold new strategy for their phones, one that ties them into their other products and services to create a Sony ecosystem. This has to go well beyond PlayStation certification. Microsoft (NASDAQ: MSFT) is building an ecosystem with Windows Phone, through Smartglass Windows Phone 8, and Windows 8 will be connected with your Xbox. The Metro interface is rolling out in Windows 8, Windows RT and Windows Phone creating a unified user experience. In the future, more services like a music service and potentially TV and Movie services will be available on all your Microsoft devices, through a single account stored in the cloud.
Apple already has most of this, their laptop and desktop experience through OSX is slowly becoming more and more similar to the iOS experience. Apple also has unified their services though iTunes and all of their devices back up and sync though iCloud. Some of this functionality also syncs to the Apple TV set top box. Google is creating an ecosystem built around Android. On phones, tablets and now TV’s, the Android experience is similar and with the Google Play Store, Google+ and Google Drive there is content available on all devices from Google. There is also content, document syncing and a productivity suite through Google Drive (formally Google Docs) as well as cloud backup. Google+ can provide automated Picture backup and syncing.
Sony makes TVs, Computers, a video gaming console, smartphones, and the Sony brand is a very strong global brand. Combine a simplified hardware lineup with their TV and movie subsidiary Sony Picture Entertainment and music subsidiary Sony Music Entertainment, and Sony could offer an ecosystem to rival Apple’s, Google’s and Microsoft’s. The ecosystem would have to be more than just a music and movie service on their new phones; it would have to be a single Sony account across all devices. This account would include your Sony music, TV shows, movies and PlayStation games as you could resume any of these on whatever device you were currently using. It would also serve as a communication and social platform with other Sony users.
This ecosystem would differentiate Sony in all areas. It would transform their offerings from just another me too phone or laptop to an ecosystem of devices that would claim part of the public’s mindshare as Apple and Google do. Going forward the ability to build a platform and ecosystem or license someone else’s will be crucial for these big tech companies. We saw just this when Nokia jumped to Windows Phone. Research in Motion with their Blackberry smartphones is finding it hard to compete. In the future they will be even harder pressed as their competition builds out not only a smartphone line, but also a complete consumer technology ecosystem. Sony does not want to find itself in a similar position and needs to start shifting to a unified platform now.
ded004 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft and is short Sony (ADR) and has the following options: long JAN 2013 $22.00 calls on Sony (ADR). Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.