Can Sony Reinvent Itself?

Bruce Rayner, Contributing Editor, Enterprise Efficiency OEM | 4/13/2012 | 35 comments

Bruce Rayner
Japan’s major corporations will be reporting their 2012 fiscal results in the next few weeks, and the word on the street is that it’s not going to be pretty, especially for the top electronics OEMs. As a preview, Sony and Sharp both warned earlier this week that their losses for the year, which ended March 31, will exceed previous projections. On Thursday, Sony’s CFO said the company’s loss will total $6.5 billion, the worst in company history and more than double its previous estimate of $2.9 billion.

A couple of months ago, I blogged about the sorry state of Sony, Nintendo, NEC, and others after they reported massive losses for the quarter that ended December 31. All were hit hard by the Thai flooding in 2011 that disrupted the supply of key components, and a strong Yen that makes Japanese products more expensive in foreign markets has eroded overseas earnings. The Yen is currently at a near record high against the US dollar.

In recent years, Japan’s electronics sector seems to have lost its technological edge to foreign innovators such as Apple and Samsung and a slew of up-and-coming competitors from China. Adding to their business challenges is the general malaise the country is feeling as it deals with the aftermath of the March 11, 2011 earthquake and tsunami and the Fukushima nuclear disaster. There’s a dark cloud hovering over the country.

The question now is: What steps will these former electronics powerhouses take to turn their fortunes around? Whatever they are, they better be bold.

Sony’s new CEO Kuzio Hiria provided a glimpse Thursday into the company’s plans to return to profitability. Hiria took the helm from Howard Springer, Sony’s first (and perhaps last) foreign CEO, earlier this month. “The time for Sony to change is now,” he said at a news conference.

But rather than laying out a bold and visionary plan for a reinvention of the company, Hiria spoke mainly of tactics. This included a focus on three existing businesses -- smartphones and tablets, cameras and camcorders, and games -- and a move away from the company’s unprofitable TV business. In addition, he announced plans to invest in medical equipment and cut 10,000 jobs.

In recent years, Sony lost its lead in TVs to Korea’s Samsung, which invested heavily in state-of-the-art mass production of flat-panel screens to become the dominant player in the market. Sony capitulated and entered into a joint venture with the Korean powerhouse to manufacture LCD screens but ended up pulling the plug late last year as the plant was not competitive.

Now Sony is banking on the Xperia smartphone to bring it back to life. Hiria said the Xperia will be the new hub of a networked environment that connects to a host of Sony devices, including the Sony PlayStation, and provides access to Sony’s vast inventory of music, video, and game content.

That’s a tall order as Sony is currently an also-ran in the smartphone market and faces a crowded field of financially strong, highly innovative competitors including top-ranked Apple and Samsung, not to mention a slew of Chinese companies that are looking to capture a piece of the low-end smartphone market. It’s going to be an uphill battle, for sure.

Of course, Hiria’s announcement was just the first salvo aimed at calming the markets and laying out the long-term plan for bringing the company back to life. If it’s to succeed, Sony -- and indeed, all the other major Japanese electronics OEMs -- needs to deliver products that will wow the world, game-changers on par with the Walkman of the 1980s. They all need to reinvent themselves. And that’s a tall order.

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David Wagner   Can Sony Reinvent Itself?   4/13/2012 1:50:45 PM
Re: Beta vs VHS?
@Lufu- nice history lesson, but I think Sony is in better shape than yo think because outside of Japan they are a well-respected brand. they got beat up with the data breaches and their losing the high profile gaming wars boh in handheld and in console. But if Sony makes something good, people will still respect it globally, if not locally.

batye   Can Sony Reinvent Itself?   4/13/2012 1:45:25 PM
Re: interesting
thank you, I think with new Playstation 4

Sony if play it's cards right could easly reclaim the market...
Bruce Rayner   Can Sony Reinvent Itself?   4/13/2012 1:34:59 PM
Re: interesting
@batye - I'd have to agree with your assessment. Although Sony has many more business units than RIM and perhaps even HP. 
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LuFu   Can Sony Reinvent Itself?   4/13/2012 1:34:29 PM
Beta vs VHS?
Under the inspirational Akio Morita maverick, SONY became the consumer electronic dominator of the world. Unfortunately, he died back in 1999 and the company has become a pinball bouncing back and forth between bumpers.

Within Japan, the company SONY has always been considered an oddball, not quite a true Japanese company. This was because the company didn't do things the Japanese way. New college grads were reluctant to join SONY and preferred going to a Matsushita, Hitachi, or Toshiba instead. One indicator of their decline in stature occurred back in the 1980s when they were pushing their Betamax video format that they had developed. The other major companies did not want to endorse SONY's superior format. They banded together and chose the inferior VHS format and effectively shut down Beta as a standard. SONY continued alone for a time before finally killing it and joining the Matsushita, Toshiba, and Hitachi cabal to manufacture VHS.

Right now they are just a shell of their former self and I'm not optimistic they can do a company saving Ctrl+Alt+Del.
batye   Can Sony Reinvent Itself?   4/13/2012 1:29:57 PM
interesting
I think Sony is in the same boat as Apple good few years ago...

unless Sony creates something unique... it could claim the market back...

if not it could be in the same path as RIM and HP...
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