TOKYO-- Sony Corp. pledged Tuesday to overhaul its money-losing smartphone unit over the next year but with sharply diminished ambitions.

Hiroki Totoki, the new head of Sony's mobile unit, acknowledged to investors that the company's previous goal of becoming the third-largest smartphone brand globally, behind Samsung Electronics Co. and Apple Inc., had been overly optimistic.

Now the focus was on returning the unit to profitability, he said, even if sales shrink drastically, with the goal of merely keeping a hand in the mobile business, given its importance to the development of future consumer technologies, Mr. Totoki said.

"Our urgent task is to make the business profitable even if we face declines in sales by 20% or 30%," said Mr. Totoki, who took over as head of the division this month, replacing Kunimasa Suzuki.

Restructuring the smartphone unit, which Sony not long ago saw as a possible driver of growth, has become a top priority as the company tries again to turn around its troubled electronics arm. Sony has repeatedly offered signs of a turnaround in its electronics arm, only to dash hopes with a renewed downturn.

Under Chief Executive Kazuo Hirai, and a new chief financial officer, Kenichiro Yoshida, Sony has accelerated a restructuring of the electronics arm. It aims to rebuild around videogame and image sensor divisions, along with its entertainment arm, which includes Hollywood studio operations and its music division. It has sold its PC business, spun its TV unit into a separate but wholly owned company and cut costs elsewhere.

Sony is generating strong growth in its videogame division and its devices segment, which makes image sensors for smartphones. The company said Tuesday that sales in the videogame business, which includes PlayStation consoles and network services, would grow to Yen1.4 trillion ($12 billion) to Yen1.6 trillion in the fiscal year ending March 31, 2018, up from Yen1.29 trillion in the current fiscal year.

In the devices unit, the company is hoping to record sales of Yen1.3 trillion to Yen1.5 trillion, up from Yen890 billion.

Other parts of Sony's electronics arm are expected to show little growth or even declines in sales. Sales in the TV segment are expected to shrink slightly, to between Yen1 trillion and Yen1.1 trillion from Yen1.2 trillion. The camera business is expected to stay flat or slip, in a range of Yen650 billion to Yen700 billion, compared with Yen710 billion this year. At a separate briefing last week, Sony predicted solid sales gains for its entertainment division, which includes the Hollywood studio and music businesses.

Sony didn't disclose fiscal mid-term forecasts for the smartphone operation. It previously cut its short-term forecasts and wrote down the value of the unit, which has failed to compete with Apple and Samsung at the high end of the market, and which has been hit hard in places like China by the rise of low-cost smartphones from makers like Xiaomi Inc.

Mr. Totoki, who analysts see as one of the main engineers of Sony's plan to deliver a companywide operating profit of Yen400 billion in the fiscal year that begins in April 2015, pledged that he would make the smartphone unit consistently profitable, beginning in the following year.

Until then, the company plans to cut the number of smartphone models, especially low-end devices, it offers in Europe and Asia, he said, and to focus on a limited range of markets. That will result in job cuts, he added.

Sony's mobile business is relatively strong in Europe, Southeast Asia and Japan, which account for 34%, 27% and 23% of its total smartphone sales, respectively. But its presence in the world's largest smartphone markets, China and the U.S., is limited, with sales in each representing only 3% of the mobile division's total.

Sony had already announced plans to scale back its mobile operations significantly in China, and Mr. Totoki said he would consider how much the company should commit to the U.S. Sony believes the global smartphone market is mature, and predicts that growth will slow over the next few years.

Despite its shrinking ambitions in smartphones, Sony sees mobile technology as essential in the so-called Internet-of-things era, when everything from coffee makers to surveillance cameras is expected to go online.

"It's hard to imagine devices with telecommunication features will cease to exist," Mr. Totoki said. "We will strengthen our profitability so that we can embark on challenges in new frontiers, even if there would be some risk."

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Eric Pfanner at eric.pfanner@wsj.com

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