Smartphones at heart of Sony's turnaround plan
A second age of Walkman, as focus shifts from TVs to Sony's traditional strengths in gaming, imaging and mobile devices
Published: 13 April, 2012
Sony's new CEO Kazuo Hirai placed smartphones at the heart of the turnaround strategy which, as promised, he outlined on Thursday. His new approach highlights the growth areas of mobile devices, gaming, digital imaging, plus gadgets and content to span all those categories. But it downplays the struggling TV business.
The new strategy, which will also cost about 10,000 jobs at the Japanese giant, more than justifies the decision to buy Ericsson out of the firms' handset joint venture earlier this year. It is also an unusually bold move for Sony, showing itself prepared to sacrifice a few sacred cows and playing to Hirai's own background in games and digital media. However, there is a Japanese-style respect for tradition too - most of the headline products are those which made the Sony brand great in the 1980s, though nowadays they are linked together by an umbrella a 'four-screen' approach which delivers content and apps to multiple devices in a uniform way.
The plan will incur a one-off charge of ¥75bn ($926m) for an extensive restructuring program this fiscal year, which includes axing 6% of the global workforce. Hirai's announcements came two days after Sony reported a record loss, and revealed it had lost ¥714bn in its TV operations over the past eight years, with its Bravia range under pressure from Samsung and others. Hirai will now reduce the number of models in this range to push back towards profitability and to cut costs by 60%, but although TV - especially the web-enabled variety - is important to the four-screen approach, growth is expected mainly from the other screens. Some analysts even believe Sony, the world's third largest TV maker, could exit the business if it does not break even within 2-3 years.
One Sony executive said this would be the "second age of Walkman", one of Sony's oldest and most iconic brands. "The market's expectation about Sony is for the company to again become a creator of the Walkman," Yuuki Sakurai of Fukoku Capital Management told Bloomberg. "That's a tough goal as the times have changed." Walkman, though the famous brand drove some of Sony Ericsson's most successful models, of course was eclipsed by the iPod and iTunes, and Apple remains the company to beat in most of Sony's activities, along with Samsung.
With these giants in mind, Hirai aims to "revitalize and grow", in particular, digital imaging, games and mobile products, which are now targeted to generate 70% of revenue and 85% of operating profit by March 2015. Other elements of the grand plan include turning around the TV unit, expanding in emerging markets and realigning the business portfolio. The last of these will include the creation of new product lines (such as electric car batteries) and businesses with a streamlined management structure and accelerated processes for innovation and R&D. Some non-core or lossmaking businesses are likely to be sold or placed in joint ventures.
Sony, worth more than $120bn in 2000, is now valued at $18bn, compared with $581bn for Apple and $165bn for Samsung. Although the outline of the plan looks bold and logical, many analysts were critical of the lack of detail about how it will be executed.