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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catalyst   Can Sony Reinvent Itself?   4/16/2012 11:53:27 PM
Can Sony Reinvent Itself?
In a word no.

Sony has 30 TV models. Kirai will slash 40%. That leaves 18. Eighteen. If this is how things will be going forward for all the myriad of departments, products, etc. then I think Sony's chances of a reinvention is not-so-good.
WaqasAltaf   Can Sony Reinvent Itself?   4/16/2012 1:47:26 PM
currency nightmare
Sony's reinvention is a lot dependant on Japanese government taking measures to counter Yen getting stronger. They will have to print more Yen to make the currency competitive to other competing counterparts such as China. 

As far as the products are concerned, I think gaming consoles remain one of the biggest reputation-builder for Sony so reinvention in that field might not be a priority. But in LCDs and OLEDs market and smartphones, the need for reinvention is high as Sony, besides currency and thus pricing problems, also faces the problem of not so decent reputation in the market compared to its competitors.
Henrisha   Can Sony Reinvent Itself?   4/15/2012 9:14:22 AM
Re: Can Sony Reinvent Itself?
It's going to be hard for Sony, but as long as they're still around, then I think they still have a shot. Technology moves fast and while other firms have overtaken Sony, they can just as easily do the same.

Their situation reminds me a bit of Kodak though. They were early in the business, but failing to go digital eventually led to their downfall.
Pedro Gonzales   Can Sony Reinvent Itself?   4/14/2012 4:28:41 PM
a come back
It is now strange to think that these companies were at the top of innovation and technology and now they are lossing money and falling behind competidors.  I think this is a good time for japanese companies, that way they know what they need to work on and learn from their mistakes.  As we all know, there was a time were apple was having hard times and almost dissapear, they learn from their mistakes and we are all seeing the results.  I will take them a while to catch up but they will.
Ahsan Zia   Can Sony Reinvent Itself?   4/14/2012 2:35:11 PM
Interesting

I don't think we can compare Sony with Apple. Sony deals with somewhat a different class of gadgets compared to a very limited Apple products. I'm not talking about the competition here since we can clearly see that the methods adopted by the two for revenue generation are different. However, Sony's collaboration with Android for its Xperia has been a major step recently and will surely prove to be a market's heartthrob for a while.

batye   Can Sony Reinvent Itself?   4/14/2012 3:03:09 AM
Re: interesting
at the present time PSP Vita is a big failure...

maybe PS4 will bring luck to Sony :)
Hospice_Houngbo   Can Sony Reinvent Itself?   4/13/2012 8:35:02 PM
Re: interesting
@batye:

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

Sony already blew the chance to reinvent itself: despite having many years head-start, Sony's Reader has lagged behind Amazon successful Kindle and it hasn't succeeded in offering competitive products over the past few years. I hope it is not too late for the company now.
Technocrat   Can Sony Reinvent Itself?   4/13/2012 8:17:37 PM
A Sony Outlook ?

It does not look good for Sony or most major Japanese companies.  I think of the considerable turmoil that the country has recently experienced, and I think it only fair to give Sony some slack.  But they do have a long road ahead.  There only major product as far as I am concerned is the playstation - And I don't' even have one ( that is going to change though) - but the point is Sony has missed a lot of opportunities even before the nation's misfortune.  

 

I am not sure where they can make that "Big Bang" impact that they were capable of in the 80's.  The company has many different revenue streams so the lack of progress in the area of tech will be cushioned somewhat - But that just undrescores another issue - their other interests.  Films for instance, is an area really losing money and probably a large reason for their most recent losses. 

 

I think Sony is getting what they deserve actually - an arrogant company that thought they'd always be number one.

 

Wrong.

LuFu   Can Sony Reinvent Itself?   4/13/2012 1:58:30 PM
Re: Beta vs VHS?
@David - True, it's the power of the brand that gives them any chance. The question for them is identifying their next wave while dealing with the burden of residue products while fighting off competition from Korea and China companies. Somehow they need to conjure up Morita's spirit to get them back on track.
David Wagner   Can Sony Reinvent Itself?   4/13/2012 1:52:24 PM
Medical
Bruce, i think the very subtle but interesting thing there is that they are getting more focused on medical equipment. i think that can be a lucrative field for them that uses a lot of their strengths in imaging.

TVs are a losing battle right now because it is a race to the bottom on price. I think they're smart to head to something where they can charge a premium for quality.
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