Ronnie05's Blog

The choices for Sony!

Posted in Industry updates by Manas Ganguly on April 18, 2012

Presenting the final profile of the decline at Sony. Read the first and second posts.This post examines the options that Kirai provides Sony.

Sony had all the makings of a winner with great competence and expertise across all key categories. However, the typical Steve Job’esy intellect to connect all elements into one wholesome synergistic company has been missing with different parts of the company working in silos which impeded the emergence of a coherent strategy. By the time the different divisions had been corralled into cooperating, Sony had lost its foothold in two crucial product categories: televisions and portable music devices. It was late to flat-panel displays, as well as to digital music players like the iPod. After disappointing sales, Sony pulled the plug on its answer to Apple’s iTunes, the Sony Connect online store, after just three years. It has not been able to offer up a comprehensive alternative since.

Sony’s woes mirror a wider decline in Japanese electronics and many of the Japanese giants have lost their technology leadership in many areas. A strong Yen has hurt exports, but a deeper issue is that the economy and the businesses has simply run out of innovative ideas. Mr. Hirai, the new C.E.O., has said that the company will focus on three businesses: mobile devices, including smartphones and tablets; cameras and camcorders; and games. Analysts and Industry watchers are already writing Sony off from the TV space. However, Mr Hirai says that Sony will not retreat in TVs.

Hirai is very keen to focus on its Xperia line of smartphones, which according to Sony is fast becoming a hub in the technology ecosystem. He said he would make Sony a leader in the mobile field and triple sales in that business in three years, to 1.8 trillion yen, or $22 billion. Sony’s purchase of Ericsson stake in Mobile venture for $1.5bn is a step in the direction of getting serious and full control of the mobile domain. The intent is to integrate its Xperia smartphones with Sony tablets, personal computers and game consoles, allowing users seamless access to content across devices — a long-trumpeted but so far largely elusive strategy.

Sony is also keen to leverage its vast catalog of music, movies and games to differentiate its content business,and hopefully replicate the success of the Apple iTunes online store. Sony has said it intends to expand its popular PlayStation game network to offer music and video, replacing the disjointed lineup of content delivery platforms it now operates. Sony hopes to increase Sales in games to 1 trillion yen ($12 billion) by the end of March 2015, from slightly more than 800 billion yen ($10 billion), and to more than double operating profit.

Sony’s digital imaging business which includes digital cameras and camcorders will also see considerable step up of action to multiply sales from $12 billion currently to $19 billion by 2015. Interestingly enough, Kirai is also scouting growth in the medical field and is looking at acquisitions and investments. Sony has emerged as one suitor for the medical equipment maker Olympus

On the ailing Televisions, Analysts are of the view that Sony needs to exit the business after 8 straight years of losses. However, Hirai has very different thoughts on that. According to Mr. Hirai -TV’s are at the center of every home and a part of Sony’s DNA. Sony would try breaking in back to profitability by 60% reduction in fixed costs (and possibly work force cust). Sometimes letting go is the hardest feat.

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