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Sony still a Walkman in an iPad age

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Sony's latest bid to halt years of losses and resuscitate its brand has provoked snorts of derision among analysts who say it falls a long way short.

The criticism came after Sony president Kazuo Hirai last week pledged to drag the electronics giant out of a painful restructuring in the current fiscal year and pointed to ultra-high-definition technology as a possible savior for its money-losing TV unit.

Hirai, appointed in 2012 to revive a company mired in losses, has centered his attention on shaking up a troubled consumer electronics business, including the television unit, which alone has lost about 790 billion yen over the past decade.

A week ago, Sony shocked investors with a 126 billion yen annual loss -- after several earnings downgrades -- and warned it would be in the red again in the year to March 2015.

Sony lost money in five of the last six years and Moody's downgraded its credit rating on the firm to junk in January.

Hirai said the company was aiming for a 400 billion yen operating profit in the next fiscal year, but that did little to impress analysts.

Sony has long relied on profits it generated from a lesser-known insurance business, as well as movies and music operations to fill some of the yawning deficit in its higher-profile electronics segment.

"Our impression is quite negative. We believe the firm needs to engage in a radical restructuring," said Deutsche Bank analyst Yasuo Nakane.

He added that Thursday's session "revealed absolutely no new information, ideas or strategies such as to change our view on the company".

Hirai's efforts to drag the TV business into the black have so far failed, but he has repeatedly shrugged off pleas to abandon a division that he insists remains central to Sony's core business.

The firm also rejected a call from a US hedge fund billionaire to spin off part of its profitable entertainment arm, which includes a Hollywood studio that produced the latest installment of "The Amazing Spider-Man" series.

Much of the losses last year stemmed from costs tied to Sony's exit from the personal computer business, part of its wider shakeup which has seen layoffs and asset sales -- including its Manhattan headquarters for more than $1 billion.

Making money in consumer electronics has been a tough ask for Japanese manufacturers in recent years as razor-thin margins and tough competition from South Korea and Taiwanese competitors dented their finances.

Sony rivals Panasonic and Sharp have also suffered massive losses, although both recently reported annual profits for the first time in years after major restructurings.

Japanese firms have also trailed in the global smartphone business where Apple and Samsung dominate, while digital camera sales have been decimated as consumers turn to picture-taking phones and tablets.

Hirai argued that a plan to split up Sony's TV business, exiting personal computers, driving into the medical equipment business and slashing costs would turn around Sony's fortunes.

He also pointed to stronger sales of 4K ultra high-resolution TVs, which tend to have better profit margins than lower-end models, as the firm shrinks losses in the beleaguered business.

Sony is a leader in the next-generation technology which is currently found on large televisions from 50 inches and above, although a high price tag has so far been a barrier to big sales.

Record sales of Sony's new PlayStation 4 games console are a potential bright spot, but the expensive launch of the system kept its games division in the red last year.

"We think it is premature to assume that Sony will be able to make the structural changes needed to stem losses given smartphone and digital camera market trends and commoditisation," Goldman Sachs said in an analysis.

"Absent any news of a potential sale of the TV business after it is split out, risk of further earnings deterioration will remain.

"There is a real risk of earnings deterioration in hardware, making it unlikely that Sony will be re-rated as a premier content/network company," it added.

A Japanese analyst who covers the company said Sony's goal of a 400-billion operating profit was "too ambitious". He also pointed to the costs tied to abandoning its PC division.

He added that the firm -- once a byword for cool which revolutionised the way people listened to music with its Walkman portable cassette player -- needed more hit products.

"Mr Hirai may have run out of steam" said the analyst, who asked not to be named.

"In the absence of appealing products to drive overall earnings... we question whether the restructuring will be adequate to the scale of the challenges facing this company."

© 2014 AFP

©2022 GPlusMedia Inc.

13 Comments
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Hirai is a joke, he sounds like a broken record, every year he says the TV division will be in the black next year... Sony has been losing TV market share for years. Compare him to HP's Whitman, she is firing people and dumping unprofitable businesses while Hirai keeps making the same broken promises without any concrete action. The fact that Sony isn't planning any more layoffs is beyond logic. 4K TVs, right, remember a few years ago when 3D TVs were supposed to save the day? Sony is a wounded dog that needs to be put out of its misery. R.I.P Sony.

2 ( +4 / -2 )

On the TV front, Sony is having it's lunch eaten for it by LG and the Koreans.

0 ( +3 / -3 )

We believe the firm needs to engage in a radical restructuring,” said Deutsche Bank analyst Yasuo Nakane.

You mean like they have been doing for at least 10 years? Sony is finished as a market leader, for years it tried to tell the public what the public wants, and was successful for some time. As soon as competition increased they couldn't compete.

1 ( +4 / -3 )

It is sad to see a company that brought us innovative projects fail so badly. It's called resting on your laurels and that is what you don't want to do in this fast-paced tech world. But, hey, the Japanese way.

5 ( +7 / -2 )

Actually Sony's 4K Quantum Dot TV are way better than any junk getting out of LG and Samsung gates. Too bad they are so pricey..

-1 ( +4 / -5 )

problem with SONY is: they don't listen to customer's wish (no English menu on Japanese products, Japanese only voltage, worst battery quality in laptop although battery for camera is the best), Hiring the most expensive designer to produce absurd looks. However, currently they listened and responded to PS fans and see the results; PS4 is #1.

3 ( +6 / -3 )

My thoughts: decades of stagnation due to chronic lack of diversity. Not only do they need to change who they're letting go, they need to broaden their minds about who they bring in.

0 ( +2 / -2 )

Times change so you have to know when time's up. Did I hear someone say 'Zenith?'

0 ( +0 / -0 )

and pointed to ultra-high-definition technology as a possible savior for its money-losing TV unit.

Hirai is kidding himself, and trying to kid investors as well. Samsung has already introduced the first curved ultra-high-def TV here in the U.S. They are continuing to raise the bar, while all Sony can attempt to do is play catch-up. And if he thinks the Sony brand will allow him to command a higher price than Samsung, he is nuts. Twenty-somethings don't even remember the Walkman, so Sony means nothing to them.

0 ( +2 / -2 )

What killed Sony? One word - SOFTWARE.

I used to be a massive Sony fanboy, but they have really stagnated on the software front. Back in the Walkman, Discman & Minidisc era - it was all about hardware. Now with tablets & smartphones, its all about software. Simply skinning Android is not going to cut it, as all the other OEMs are slowly coming to realise (even Samsung is jumping ship to Tizen).

The inner-nerd wants Sony to pull through - c'mon guys! Software to match the hardware experience! No more gimmicks! Listen to your customers!

2 ( +3 / -1 )

LG and Korean products are so cheap like the chinese do, they are dumping their trash in the world markets..we may never know. but dont underestimate japanese when they decided to do something , they will do it..

-1 ( +3 / -4 )

The title of the article tells it all...

Sony should step in the DJ world, where some of its gadgets are taken as top quality. From there it could regain some of its lost territory in the music industry.

0 ( +1 / -1 )

sighclops,

Amen. I too was an avid fan of almost all things Sony. I was always particularly impressed with the durability of their products. But that started to change as engineered obsolescence became a dominant policy and simple small consumer electronics like headphones and portable speakers suffered some sort of catastrophic failure within a year.

The icing on the cake for me was Sony's first volley in the Digital Audio Player Wars. Or rather, Sony's vision of the "Everyone should be using Sony's ATRAC audio compression technology" Digital Audio Player Wars. Followed by Sony's, "Why? Why? WHY won't everyone convert to Sony's ATRAC audio compression technology?!?" successive entries into the global market, each of which fell flat on their faces.

I don't know or pretend to understand the tech behind making digital music transferable to a portable player, but I do know that Sony's first incarnation of the Sonic Stage software suite designed to accompany the Sony's Network Connect Players was an unmitigated disaster compounded by what can very simply be called Sony's complete and utter indifference to a flood of legitimate consumer complaints about the bulky, unwieldy, painfully slow software that would crash regularly, and under the best of circumstances, complete the transfer of, say, 100 audio files in a mind-blistering 8 hours (true story).

Sony made no attempt to fix a software suite that looked less like the byproduct of a world renowned consumer electronics company and more like an end-of-term high school computer class project. When pressed on the issue, Sony ignored everyone and everything. Then quietly pretended that incarnation of Sonic Stage never existed, releasing a new, cleaner one a couple of years later, but making no effort to address the dissatisfaction of what had to be hundreds of thousands of seriously pissed-off customers who bought $300 audio players they could scarcely use because they weren't compatible with the newset versions of Sonic Stage, i.e., the firmware in the players was crap too.

This is why Sony is sucking wind now. Their personal consumer electronics division, riddled by slapdash efforts, half-measures, and arrogant indifference to the concerns, needs, and desires of the customer, essentially ushered in the demise of Sony as a reliable brand.

1 ( +2 / -1 )

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