Hirai outlines revised strategy; studio safe for now
As Sony’s new president and CEO, Kazuo Hirai, unveiled his strategy Thursday to return the company to profitability, he had one message for the studio division in Hollywood: You’re safe for now.
“Sony will change,” Hirai said during a news conference at Sony’s Tokyo HQ as he outlined a new “One Sony” initiative that will have the company concentrate on core strengths — digital imaging, gaming and mobile devices like phones, tablets and laptops. It also plans to expand its presence in emerging markets like India and Mexico to generate more sales.
“We have heard a multitude of investor voices calling for change,” Hirai said. “Sony has always been an entrepreneurial company. That spirit has not changed. We cannot shy away from difficult decisions.”
Hirai, who formally took over the top job from Howard Stringer on April 1, said the goal is to achieve an operating profit of 5% by the start of the 2014-15 fiscal year on group sales of $105 billion.
As previously announced, Sony confirmed it will ax 10,000 jobs, or about 6% of its global workforce, and expects to more than double its previous loss forecast for the last fiscal year, which wrapped March 31, to $6.4 billion, a company record. Earlier forecasts projected a loss of $2.7 billion.
The restructuring is expected to cost $926 million in fiscal 2012.
Company is looking to become more like rival Samsung, whose electronics operations generated an operating profit of $5.1 billion for the first three months of the year, nearly doubling the amount recorded for the first quarter of 2011.
Among Hirai’s first tasks is to restructure Sony’s ailing TV manufacturing biz, which has been bleeding red ink for eight years as lower-cost competitors like Samsung eat its corporate lunch. By slashing fixed costs by 60%, reducing the number of TV models it makes by 40% and developing newer OLED and Crystal LED displays, Sony hopes to bring the division back into the black by the next fiscal year.
By shifting resources, it wants its digital imaging products, games and mobile devices to account for 70% of its sales and 85% of operating profit by the 2014-15 fiscal year.
At the same, it wants its PlayStation games biz to generate an operating profit of 8% on sales of $12.3 billion by the same frame. It hopes to do that by expanding the number of downloadable game titles and services it offers and through new hardware. In February, Hirai said he would expand the gaming console’s online network to connect with all of Sony’s devices to better handle the distribution of video and music.
Sony also hopes to triple its sales of Xperia-branded smartphones to $22.2 billion over the next three years — again through content like new games, music and photo services. It bought out Ericsson’s half of the smartphone joint venture for $1.5 billion to bolster the Xperia brand and enable the smartphones to connect to Sony’s other hardware devices and content offerings.
“Smartphones will become the hub device,” Hirai said.
Samsung’s bottom line benefited from strong sales of its Galaxy line of smartphones and mobile devices.
A reliance on content should bode well for Sony’s entertainment arm.
Piracy concerns previously hampered Stringer’s desire to better leverage Sony’s entertainment content as an enticement for consumers to buy more electronics hardware. Hirai aims to utilize Sony’s music, movies, TV shows and games more effectively, primarily through revamped digital distribution networks, just as Microsoft’s Xbox 360 gaming console has evolved into a hub for all kinds of entertainment.