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Hirai remakes Sony in first year as CEO, now must win consumers

Jay Alabaster | April 1, 2013
In his first year as Sony CEO, Kazuo Hirai has remade the company, cutting thousands of jobs, selling off large businesses and core properties, and moving divisions around the world.

"Sony needs to align its mobile and computer divisions more closely. It needs a slightly more combined product strategy," said Mito Securities analyst Keita Wakabayashi.

In its PlayStation franchise, Sony has cut sales targets for its handheld consoles after disappointing holiday sales, even as it gears up for the release of its PlayStation 4 game console later this year. The company is still trying to find a successful strategy to incorporate its online game, music and video services, which it hopes to kick start with the PS 4.

Hirai has promised a small overall profit of about US$200 million in his first year as CEO, and will likely meet his goal. Sony's electronics division is unlikely to generate a profit on its own, but its financial and entertainment divisions are still strong.

The company will also book billions of dollars in one-time income after selling off major assets including its New York headquarters, a building complex in Tokyo, and stock holdings. Sony watchers have generally praised the sale of the assets, which have generated strong investment returns over their original prices.

As part of his restructuring plan announced last April, Hirai said he would cut 10,000 jobs and divest non-core businesses. Over the past year he has overseen deals at a dizzying pace. The company finalized the sale of its chemical product business, and it later announced a broad early retirement program and the closure of a Japanese factory.

A month after his speech, Sony announced it would pull out of an LCD venture formed with domestic peer Sharp in 2009 to make screens for large TVs at a Japanese factory. Hirai has repeatedly promised Sony won't give up on its loss-making TVs, calling them a "fundamental platform" and managing them personally even as CEO.

But the company is clearly moving toward outsourcing key components to its rivals, at least in the near-term. Foxconn took a major share in the same Sharp factory a few months later, and a separate Sony joint venture for LCD screens is now run entirely by Samsung.

"Sony's TVs are in better shape, but they're still in the red, especially given the tough business environment," said Wakabayashi.

Sony does have a deal with Panasonic to jointly develop large-screen OLED screens for future TVs. It has matched rivals with its 4K or Ultra HD TVs, and gone further with a 4K camcorder and a content delivery service.

"Hirai has made progress in optimizing the balance sheet and its business portfolio, this is a positive," said Nakane.

"The true test will come next fiscal year, because Sony can't keep selling assets forever."

 

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