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Sony is back in business with array of new digital offerings

Sony is back in business with array of new digital offerings
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First Published: Thu, Sep 04 2008. 12 47 AM IST

Dazzling display: Visitors watch a 29 August video presentation by Sony at the IFA consumer electronics fair in Berlin. Sony showed off its new products, including the ZX1, the thinnest LCD TV in the
Dazzling display: Visitors watch a 29 August video presentation by Sony at the IFA consumer electronics fair in Berlin. Sony showed off its new products, including the ZX1, the thinnest LCD TV in the
Updated: Thu, Sep 04 2008. 12 47 AM IST
Berlin: When Howard Stringer became chief executive of Sony Corp. three years ago, the Japanese company was in crisis. The consumer electronics business that had produced the transistor radio, the Trinitron television and the Walkman was losing money. Sony had been overtaken by Samsung Electronics of South Korea, which had correctly anticipated consumer demand for flat-panel TVs.
By January 2006, Sony had so few new products to brag about that Stringer had to call the actor Tom Hanks on stage during his keynote speech to the Consumer Electronics Show in Las Vegas to help him buy time as he promoted the Sony Reader, a hand-held digital book reader.
Dazzling display: Visitors watch a 29 August video presentation by Sony at the IFA consumer electronics fair in Berlin. Sony showed off its new products, including the ZX1, the thinnest LCD TV in the world. Fabrizio Bensch / Reuters
“I clutched that Reader for an hour and sold it and sold it and sold it,” Stringer said at the Internationale Funkaustellung (IFA) in Berlin, the world’s largest consumer electronics show by number of visitors. “It was all I had.”
Almost three years later, Sony’s distress appears to be a thing of the past. At the IFA, which ends on Wednesday, Sony showed off an array of products defined by superlatives: the EX1, the first high-definition wireless home entertainment system; the ZX1, the thinnest LCD TV in the world; and the Z4500 line of LCD TVs that process screens four times as fast as a conventional LCD television.
“We have spent a lot of time over the last three years adjusting our business for the digital age,” Stringer said. “We are now making more money than we have ever made before. Our core businesses are working for us.”
Samsung remains a formidable competitor, with 22.8% of the television market by revenue compared with Sony’s 12.5%. The company will stay atop the TV business by expanding its line of larger, expensive LCDs—going head to head with Sony in its strongest segment, said JongWoo Park, the president of Samsung’s digital media business, which includes televisions.
“I am well aware Sony is aggressively trying to build market share,” Park said during an interview at the IFA. “But we are going to stay on top because we can use the power of our market share.”
Sony faces other challenges. In mobile phones, Sony Ericsson, the 50-50 joint venture, remained a distant fifth with an 8.2% market share in the second quarter, according to Strategy Analytics.
In video games, Sony lost the equivalent of $1.14 billion (Rs5,050 crore) during its last fiscal year, but the business has since become profitable, Stringer said, as sales of PlayStation3 games offset losses on the hardware.
Under Stringer, an affable, Welsh-born former president of CBS in the US with dual US and British citizenship, Sony has invested heavily in software development, as consumer electronics and computing merge.
In the year through March, Sony added 17,500 employees, many of them software engineers in Eastern Europe, India, California and Asia, according to Fujio Nishida, president of Sony Europe. Since 2005, Sony has cut 10,000 employees and closed 11 old-generation TV factories.
“Howard was evangelizing internally within Sony for a stronger emphasis on software, how software adds value to devices,” a former Sony US executive, who did not want to be named because he was uncomfortable commenting on a former employer, said. “In every meeting I was in, he was trying to change some of the hardware culture.”
Most importantly, Stringer has reduced the insular mentality that had balkanized Sony’s electronics, movie, games, music and mobile businesses, said a former senior Sony Europe executive, who also did not want to comment publicly on his former employer.
“I used to have to force people to sit down and talk with each other,” the former manager said.
Stringer, one industry expert said, is seeking to deliver on the reform goals set by his mentor and predecessor, Nobuyuki Idei, who in the 1990s initiated the push into software and promoted Stringer to head Sony’s US operations.
“Sony over the past few years has been investing significantly in software and raising the user experience, working to tie together its broad family of products,” said Ross Rubin, an analyst at NPD Group Inc., a research company in Port Washington, New York.
“Sony’s brand trust still remains far ahead of Samsung as a purchase motivator, but Samsung has certainly been very aggressive about building its brands,” Rubin said.
Stringer’s cross-marketing initiatives will be seen in the upcoming James Bond film, Quantum of Solace, scheduled for release in November. Sony Pictures shot the film in high-definition, with scenes showcasing new Sony electronics. Joint marketing campaigns are being timed at Sony sales outlets and electronics product introductions.
In February, Sony also won the battle to define the high-definition TV standard when a consortium backed by Toshiba Corp. abandoned the HD-DVD format, leaving the Sony Blu-Ray disc as sole survivor. The string of victories has brightened the mood at Sony, Nishida said. “By the end of 2010, our goal is to be the market leader in TVs,” Nishida said.
Some of Stringer’s changes have been more radical. Sony now makes LCD TV panels in a 50-50 joint venture with Samsung in Tangjeong, South Korea. A second LCD factory near Osaka, Japan, a joint venture with Sharp Corp. in which Sony will own 34%, is to open by the end of 2009.
The turnaround is also evident in the company’s financial results after three years of cost cutting, layoffs and restructuring under Stringer.
In the year that ended 31 March, Sony’s profit tripled to ¥369.4 billion, or about Rs15,000 crore, on a 6.9% increase in revenue, to ¥8.87 trillion. In consumer electronics, which make up about two-thirds of Sony’s sales, operating income more than doubled to ¥356 billion.
© 2008/INTERNATIONAL HERALD TRIBUNE
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First Published: Thu, Sep 04 2008. 12 47 AM IST