Tokyo/Seoul: Shares of Sony Corp fell to their lowest in nearly four months on Friday after the electronics maker’s new business strategy failed to convince investors it could deliver strong profit growth.
Sony, which is heading for its second straight annual loss, said on Thursday it would launch 3D TVs and networked products and services as part of a plan to boost its operating profit margin to 5% in the year to March 2013.
The 5% target had originally been set by CEO Howard Stringer in 2005 for the business year to March 2008. It narrowly missed the target that year before falling into the red on the economic slowdown and tough competition.
Market players remain sceptical whether Sony can achieve its goal of turning its video game and TV operations profitable next year as it struggles to compete with overseas rivals such as South Korea’s Samsung Electronics Co Ltd.
“The strong yen makes it difficult for the Japanese to compete on prices, while the Korean’s strength in volume and mass production technologies keeps them ahead,” said John Park, an analyst at Daishin Securities in Seoul.
“Japanese TV makers like Sony will try hard to expand in LED-backlit TVs next year, but are likely to have an uphill battle with Korean leaders,” he said.
Sony’s TV business is in its sixth-consecutive year of losses as it grapples with a firmer yen and intensified competition from Samsung and LG Electronics Inc.
Shares in Sony were down 2.8% at 2,400 yen after earlier hitting 2,375 yen, their lowest since July 29. The benchmark Nikkei average was down 1.3%.
The maker of Cyber-shot cameras and PlayStation games shed jobs, closed plants and sold non-core assets following the global downturn to cut costs, and investors were awaiting a convincing growth strategy from management ahead of Thursday’s announcement.
“It’s good the direction of the company’s network strategy has become clearer and that it now has some products with growth potential, such as its electronic readers,” Daiwa Securities SMBC analyst Kazuharu Miura said.
“But it’s still unclear if network-compatible products will boost its market share substantially or if content distribution and other network services will markedly raise its profitability.” Sony plans to launch a new online service to distribute movies, music, books and games to network-capable TVs, Blu-ray players, ebooks and other devices, in a move to capitalise on its strong presence both in hardware and entertainment industries.
The company pioneered the mobile music market 30 years ago with its Walkman and once ruled the global television industry in the era of box TVs, but it is now struggling to keep pace with nimbler South Korean rivals and innovative US IT companies.
“What we’re seeing is a weakening of Sony’s brand power. That’s especially clear in North America where its market share has fallen sharply. The situation is so bad it almost makes me want to cover my eyes,” said Chibagin Asset Management’s advisor Fujio Ando.
“They no longer have products that are unique and can control the market,” he said.
Its portable music players have been in the shadow of Apple Inc’s iPod in recent years, while, in the LCD TV market, its Bravia models have lagged a long way behind Samsung, and now LG is threatening Sony’s No.2 position.
Samsung accounted for 22.5% of global LCD TV revenues in July-September, followed by Sony’s 12.1% and LG’s 11%, according to data from research firm DisplaySearch.
In an effort to improve profits at its TV operations, Sony plans to have 40% of its LCD TVs assembled by outside manufacturers in the next business year starting April 2010, up from 20% this year.