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To say Japanese electronics conglomerate Sony (NYSE:SNE) is struggling is an understatement. On Wednesday, CEO Kazuo Hirai told reporters the company will cancel dividend payments for the first time since going public in 1958. In addition, Sony plans to cut nearly 1,000 workers in its mobile communications division.

The company also lowered its full-year guidance by estimating a loss of $2.1 billion. One has to ask if Sony is falling apart before our eyes: Once considered the most influential consumer electronics company, Sony is now a cautionary tale of failing to innovate and underestimating the competition.

The smartphone impairment charge
In addition to the dividend cut, Sony announced an impairment charge of 180 billion yen ($1.67 billion) for its mobile phone division. Sony has struggled in this space by missing out on the high end amid competition from South Korean giant Samsung (NASDAQOTH:SSNLF) and Apple. In addition, the company is now losing out on the lower end against Huawei Technologies, Lenovo, and upstart Xiaomi. As a result, Sony's mobile products division posted $25 million loss during its first fiscal quarter.

Sony's strategy is to boost sales for its flagship Xperia smartphone unit. Fellow Japanese company SoftBank plans to offer the device through its U.S.-based subsidiary, Sprint, by the end of the year.  However, Sony's mobile communications job-cut announcement is noteworthy considering that in February the company announced it would focus on mobile devices in an attempt to right the ship.

What happened to Sony?
In a word: Samsung. A great example of the two companies' fortune reversal can be surmised by looking at TVs. For decades, Sony's Trinitron was the must-have model for television shoppers, and the company reaped the benefits of its brand cachet. However, in many cases large and successful companies have no desire to change their business model, while lean and hungry competitors look to disrupt their counterparts.

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Sony would like to "make believe" that Samsung didn't exist. Source: The Motley Fool

Eventually, Samsung found a competitive advantage: its flat-panel design. While Sony and a host of other players --JVC, Hitachi, and Pioneer --struggled to transition to flat panels, Samsung acquired substantive market share through its first-mover advantage in this space. Those other players ultimately left the TV market amid lowered margins, while Sony lost its market share dominance.

A similar story can be told with the mobile revolution. Through a joint venture with Ericsson, Sony had moderate success throughout the first half of the 2000s. However, the company failed to see the huge dynamic change that occurred with the introduction of Apple's iPhone in 2007 and subsequent Google Android offerings. The company bought Ericsson out in 2012, but still languishes in sales and brand recognition.

Where to now
Hirai emphasized a three-pronged approach to turn around Sony's fortunes: entertainment, gaming content and consoles, and mobile devices. But with mobile devices struggling, it appears entertainment (music and movies) and its PlayStation video gaming business are the best ways to bolster the company's situation.

Investors have noticed; In 2013, activist hedge fund leader Daniel Loeb sent a letter to Hirai in which he called for Sony to divest 15%-20% of its entertainment unit, pay off debt, and streamline its consumer electronics unit to unlock value. Obviously, Loeb was not recommending this out of kindness; he was a large shareholder in the company at that time. Sony refused Loeb's call for divesture, but the cacophony might become too loud to ignore after the company's revised guidance.

Final thoughts
For what it's worth, Hirai said it was his "No. 1 responsibility" to reinstate the dividend. I think the company should first focus on becoming profitable once again. Sony has reported only a single profitable year in the last six, and that was due to one-time issues of asset and investment sales. When it comes to Sony, Dan Loeb's divestiture plan is looking better by the day.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.