Sony CEO Lays Out New Plans to Make Company Profitable
April 12, 2012 11:08 AM
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Sony CEO Kazuo Hirai
Changes to digital imaging, games, mobile and TV are on the list
Sony CEO Kazuo Hirai announced his "One Sony" approach today, which consists of a series of initiatives that aim
to turn the company around
Hirai, who became CEO starting April 1, has quite an agenda for the sinking ship he has inherited. He laid out five key ideas for transforming Sony's electronics business, including strengthening core businesses (digital imaging, games and mobile); turning around the television business; expanding business in emerging markets; creating new businesses and accelerating innovation, and realigning the business portfolio and optimizing resources.
Hirai announced previously that the three core pillars of Sony's business would be digital imaging, games and mobile. In today's "One Sony" presentation, he noted that he hopes to generate 70 percent of total sales and 85 percent of operating income for the entire business from these three pillars by fiscal year 2014 (FY14), which is the year ending March 31, 2015.
To break it down further, Sony hopes to leverage key digital imaging technologies like image sensors, lenses and signal processing via consumer products and has a total sales target of 1.5 trillion yen for the consumer, professional and image sensor businesses by FY14.
As far as games go, Sony will continue offering gaming experiences through its PlayStation hardware as well as the PlayStation Network, but plans to expand its catalog of downloadable game titles and subscription services. Sony hopes for one trillion yen and an operating income margin of 8 percent by FY14.
With mobile, Sony wants to pull its VAIO, smartphone and Sony Tablet businesses together to offer superior mobile devices that feature the Sony Entertainment Network. Sony is looking for sales of 1.8 trillion yen in FY14.
While the three core pillars remain the primary focus of the company, the TV business still holds a special place in Hirai's heart. He has said before that he wants to turn it around after years of consecutive losses, and even said he'll be directly running this unit himself.
correct the TV business
, Hirai plans to improve design engineering efficiency, reduce the number of models by 40 percent from FY11 to FY12, and enhance the quality of its BRAVIA LCD televisions with OLED and Crystal LED Displays. Hirai hopes to make the TV unit profitable by FY13 by reducing fixed business costs by 60 percent and operating costs by 30 percent from FY11 to FY13.
Other changes that Hirai plans to implement around the company is increased sales of electronics in emerging markets from 1.8 trillion yen in FY11 to 2.6 trillion yen in FY14; entry into the medical industry by creating medical equipment, targeting sales of 50 billion yen in FY14, and implementing overall restructuring costs of 75 billion yen in FY12.
By completing all of the above, Sony hopes to generate 6 trillion yen and operating income margin of 5 percent for its electronics business in FY14. It also hopes for sales of 8.5 trillion yen and operating income margin of over 5 percent for the Sony Group overall in FY14.
Sony could certainly use all the help it could get. One of its worst issues was the LCD TV business, which had eight years of consecutive losses. After
shaking up this unit
in 2011, Sony finally sold its 50 percent manufacturing stake to Samsung in their LCD joint venture called S-LCD Corporation.
Standard & Poor's Ratings Services confirmed an unfavorable outlook on
Sony's long-term corporate credit rating
long-term corporate credit and senior unsecured debt ratings dropped from an "A-" to "BBB+."
To make matters worse, Sony then announced that it would
cut 6 percent of its global workforce
as soon as the end of 2012. It then announced that it expected an
annual net loss of $6.4 billion USD
This article is over a month old, voting and posting comments is disabled
RE: Key points
4/13/2012 3:04:12 PM
My point is that I'm not being blind to downsides; the downsides are critical to monitor as when they reach critical mass it is time to exit as a shareholder.
The iPad 3 worries me; if they don't release one with a more efficient screen, CPU, and smaller battery (all of which are crucial cost containing measures) then the Retina display is hardly worth it. The question really is time; will they do it this year (and maximize profits) or next year (to maximize sales). Doing it this year means they may have to cut prices on "older" units to move them off the shelf, but on the flip side the "newer" units have much better margins.
If they do it next year they are sacrificing margins but reduce the chance of channel/inventory confusion. They might also have to do so simply because a 32nm A5 is scarce and all resources might need to be dedicated to the iPhone.
Or the technology might not be ready; we know that IGZO screens are coming, the only question is when they will be ready.
"So if you want to save the planet, feel free to drive your Hummer. Just avoid the drive thru line at McDonalds." -- Michael Asher
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