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.
"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.
Yes. I have noticed that too. Is there any particular reason why number 4 is unlucky? Is it only prevalent in Asian countries? While I was in Malaysia, I noticed that instead of number 4 in the elevator, number 3A was there. I was wondering why?
What do you mean by "quite unlucky if you ask me?"
Imagine getting in an elevator that had a floor, with the number that when you pronounce it sounds exactly like the word death. If you're the type that believe in being lucky or unlucky then a 'death' floor would be quite unlucky.
You are right. I think that with Sony being on top so long ago and with the rise of such great technology, they are being left by the wasteside. I also believe that these products are still the best they just need some reinventing to keep up with the times. A year or so ago, I received a sony walkman MP3 for Mother's Day and I love it. They have done a great job with this and hope that they can do a great job with the new smartphone that they are coming out with. I just know they can compete, they just need to come on soon with something groundbreaking.
Well some of their products are, like you said "the best there is" but their tv is really disappointing. I have a Samsung tv and my cousin has a Sony television, recently I put on a music video or something on to a flash drive and took it to his place to show it to him. I was really surprised when the tv didn't detect the format. His tv might not be the latest one there is but still I think Sony has to widen it's circle a bit more. What do you think?
I agree. I believe that certain manufacturers have grown respect in the industry by having a strong product and the name that has been around for many years with much success, but that does not mean that they have the better product. I think that Sony will need to really step their game up and compete with some of the brands that people would not think twice about but has the better technology and picture quality overall. Technology grows overnight so I think the game is for those that can keep up with the constant changes that are out there. Names and awards can not measure to quality and performance.
So you mean to say that Sony is not keeping up with the present innovative market? See, the compatibility issue cannot be blamed on the sony format. It may be fault of the Samsung tv on the whole. How can you assume that it must be the Sony's file format fault? Sony is one of the biggest giants in the market and it has the most updated infrastructure needed to meet today's technological requirements.
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.
@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.
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.
@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.
True, it's the power of the brand that gives them any chance.
To me the Sony brand stands for very little: overpriced, low-quality, overly technical. Sony still manages to manufacture a few gems here and there, but it is the company's complete lack of expertise in software, UI/UX, etc. that make those incredible hardware boxes difficult to use, prone to failures, and expensive.
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.
This sounds to me there's an assumption that Sony is still at the top with Korean and Chinese companies clawing their way up. If that's true, that is no longer true. Korea's Samsung has already beaten Sony and it is Samsung that will be fighting off competition from Japan and China.
I do want Sony to reinvent itself, but I don't think the measures announced by Hirai is enough. And the focus is still hardware and not on the total experience.
I don't know catalyst. In consumer products like TVs people usually think of either Samsung or Sony. In video games it is Xbox or Sony. Granted, they've struggled in the computer market and that colors our perceptions here, but I think they still have a strong brand in the consumer market.
That said, in those comparisons above, my TV is a Samsung and my game console is an Xbox, so maybe you're on to somehting.
That said, in those comparisons above, my TV is a Samsung and my game console is an Xbox, so maybe you're on to something.
The only thing Sony in my home is the KV-34XBR910 and an even older Walkman. Even to this day this 34-inch CRT TV has the best video quality compared to the very best LCDs and plasmas.
@catalyst - Can't disagree heartily about the state of SONY's product quality, mix, and innovation. Part of their problem stems from their business diversification in trying to develop content (Playstation gaming, music, movies/Columbia), telecom, hardware, computers, retail stores, and a bunch of low margin consumer electronic products. They definitely lost their edge. It didn't happen overnight but over time.
I'm also not optimistic about Hirai's plans to turn the company around, more uninspiring rhetoric from a beaten down company rather than a passion call charged with confidence. Still, the brand SONY carries a lot of residue value that gives them a buffer and some time to recapture their panache. Other companies have done it - Apple, IBM, GM, Xerox, Yahoo...wait a minute, those last two aren't good examples. Good luck Sony.
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.
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.
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.
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.
Plus like the article said, Sony products are quite expensive in foreign markets. I remember I was expecting to buy some electronic goods from Singapore when I went there last year. Sony bravia televisions are a lot expensive than other brands like Samsung, Philips, Panasonic etc. This discourages their customers. No wonder Sony is coming down.
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.
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.
Sony has always captured the market with their supreme picture quality and their high quality products. So in no way other companies such as Samsung can compete the robustness of the Sony products. However, they may capture the market by producing low cost goods but then again, isn't that a sign of an anticompetitive conduct? Samsung may have top upped its product class by stepping in with android but that in no way can break the brand image of Sony. For me Sony products are simply outclass and way above its competitors in terms of quality.
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