End of road for Sony?
Technology companies keep a lot of cash and investments for a reason, to tide them over in bad times, and to fuel turnaround strategies. When the cash starts to run out, however, that’s a clear sign that we’re no longer talking about a turnaround.
A headline that caught my eyes today, was that Sony shares had breached the 1000 yen level in Nikkei. This was the first time after 1984 (28 yrs) that Sony has seen such a valuation. Worse, Sony now has less cash than a quarter’s sales.
Compare that with Microsoft which could get by for three quarters on its cash, if sales fell to zero. Or Cisco, which could live for a year on its cash and short-term investments.
Kazuo Hirai’s turnaround plan for Sony has yet to show any results whatsoever. There is a point in the life of every technology company’s lifecycle where you go from turnaround mode to survival mode. At that point it’s usually too late to do much of anything. The next best option is then to sell the non-core assets of the holdings and draw money to support core operations.
Read my earlier posts about Sony: The choices for Sony, Of lost opportunities and bygone glories, Profiling Sony’s accumulated losses across categories