Sony seeks transformation

03 February 2012

TOKYO: Sony, the consumer electronics group, is seeking to undertake a transformation programme to reverse a long-term decline in its position across several core categories.

The firm has appointed Kazuo Hirai as its new CEO, but also reported a $2.9bn loss in the last quarter. Hirai outlined an intention to focus on digital imaging, "smart" devices, gaming, TV manufacturing and, most of all, innovation to overcome this trend.

"There will be situations in which we will be required to choose, make a decision, or implement very painful issues that cannot be avoided for the future of Sony. But we can't take a step forward if we are afraid of this," Hirai said, Reuters reported.

The company's recent strategies have involved pursuing an integrated approach to promoting entertainment properties, like the Spider-Man film franchise and Kelly Clarkson, the singer, and products such as the Vaio computer and Bravia TV set ranges.

Since June 2005, when Sir Howard Stringer was named as CEO, Sony's share price has tumbled by 60%, including a 53% drop in 2011, whereas Apple logged a 26% leap and Samsung gained 11%.

"There was such a huge expectation when Sony announced its first foreign CEO," Koji Toda, chief fund manager at Resona Bank, said. "Hirai needs to rebuild Sony so that the company can produce something that cannot be copied by others. Sony was once such a company."

Among the main difficulties facing the firm are a strong yen, falling prices in the TV sector, soft demand in mature markets and the rapidly-intensifying rivalry in the electronics industry.

"Sony's TV business still faces challenges and the company is poorly positioned in the fast-growing mobile computing market, which Apple is now dominating," said Jeff Loff, an analyst at Macquarie Capital Securities. "Its tablet offering is weak, and it has not yet introduced an Ultrabook product."

According to Kim Young-Chan, an analyst at Shinhan Investment Corp, Sony's competitiveness has "sharply weakened", and fundamental structural issues exist that may need years to resolve.

"It's not just Sony, but Japanese IT firms have similar problems. They are failing to innovate and produce industry-leading products in almost every major area - from TVs to displays, tablets and smartphones," he said.

Hisashi Kuroda, general manager at Meiji Yasuda Asset Management, argued the sole positive was Sony's recognition that inaction is not an option.

"Sony has few businesses that have value. In short, it has failed to change," he said. "One silver lining is that governance is working and they realised the company was shrinking but not developing."

Data sourced from Reuters, Business Week; additional content by Warc staff