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Ken S 02-11-2014 11:58 AM

After Losses, Yet Another Overhaul for Sony
 
From The New York Times - February 06, 2014

By ERIC PFANNERFEB. 6, 2014

TOKYO — After failing to turn around two of its most troubled consumer electronics businesses, Sony is pushing them aside.

The Japanese electronics and entertainment giant, which predicted on Thursday that it would lose 110 billion yen, or about $1.1 billion, in its current fiscal year, said it would sell its unprofitable personal computer unit. It also announced plans to turn its equally troubled television manufacturing business into a separate, wholly owned subsidiary. And it said it would cut 5,000 jobs.

The overhaul is the fourth round of large-scale job cuts over the last decade. Sony announced 10,000 reductions in 2005, 8,000 more in 2008 and a further 10,000 two years ago, bringing its head count down to 145,000 as of September.
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While previous divestitures have involved peripheral operations in areas like chemicals, now Sony is ridding itself of a brand and a business: Vaio computers, which it once considered central to its ambitions of keeping pace with global technology powers like Apple and Samsung Electronics. And it is positioning itself at arm’s length from television sets, a sector in which its Trinitron and Bravia TVs once set the standards in picture quality and brand image.

“Sony has had bigger cuts,” said Damian Thong, an analyst at Macquarie Securities. “But these are, in some ways, the most meaningful cuts.”

While Sony’s problems reflect a broader crisis in the Japanese electronics industry, other companies like Panasonic have moved more aggressively to revamp operations. Panasonic, which has been pulling out of certain consumer electronics markets, like smartphones, and focusing more on behind-the-scenes businesses like batteries for electric cars, this week reported that its quarterly earnings more than tripled.

While some investors and analysts have urged Sony to get out of consumer electronics entirely, the chief executive, Kazuo Hirai, reiterated on Thursday that he wanted to rebuild around promising areas like game consoles and smartphones.

Those businesses showed progress in the quarter ended in December. Sony reported a “significant increase in sales of smartphones” as well as a big jump in operating income in its game division after the introduction of the PS4 console.

Over all, the company reported net income of 27 billion yen, or $267 million, after a loss of ¥10.8 billion a year earlier. Sales rose to ¥2.41 trillion from ¥1.95 trillion, though the main factor was a weaker yen, which increases the value of overseas sales when converted into the home currency.

But investors have gotten used to a dose of bad news after any sign of improvement from Sony, and Thursday brought no exception, with the new estimate of the loss for the current fiscal year, which ends in March, after a previous forecast of a profit of ¥30 billion ($296 million). While much of the expected loss will come from revamping costs, Sony also lowered its full-year sales forecast for smartphones to 40 million from 42 million.

At a news conference in Tokyo, Mr. Hirai described the agreement to sell the PC unit to the investment fund Japan Industrial Partners as an “agonizing decision.” Sony said it planned to keep a 5 percent stake in the new PC company to be formed from the sale. Other terms, including the price, remain subject to negotiation, Sony said.

Japan Industrial Partners specializes in buying unwanted assets from Japanese electronics giants, including companies like NEC and Olympus. Based in Tokyo, it was founded in 2002 by Hidemi Moue, who previously worked at a venture capital firm called Mobile Internet Capital.

Just last week, it agreed to buy an Internet service provider from the Japanese information technology giant NEC. In 2012, the firm paid $676 million for the mobile telecommunications unit of the camera maker Olympus, which was embroiled in scandal.

Japan Industrial Partners has teamed up over the years with Bain Capital of Boston. In 2007, the two firms bought SunTelephone, a Japanese telecommunications and equipment leasing company.

Japan Industrial Partners “believes that with its support, the new company that will operate the Vaio-branded PC business will be able to achieve future growth and profitability and meet the expectations of Vaio customers by leveraging the wealth of innovative design expertise and operational know-how accumulated by Sony within the PC business,” the companies said in a statement.

Along with televisions, PCs have been a particular drag on Sony. PC shipments from all makers worldwide fell 10 percent last year, to 316 million, according to Gartner, a research firm, as more consumers turned to tablet computers or smartphones to connect to the Internet. Sony’s share of that total slipped to 1.9 percent worldwide in 2013 from 2.1 percent in 2012, Gartner said, making it the ninth-largest maker of PCs worldwide.

With profit margins under pressure in the PC sector, only a handful of the biggest companies, including the market leader, Lenovo, make money.

“Somebody has to exit from the market because there are still too many competitors,” said Mikako Kitagawa, an analyst at Gartner. “This is an extremely difficult market in which to survive. That is not going to change.”

After splitting off its television business into a subsidiary, Sony said, the new unit will focus on expensive sets, including ultrahigh-resolution 4K TVs, while scaling back output of cheaper models.

While Sony is retaining ownership, the new structure could also make it easier to open the TV business to outside investment, analysts said. The changes could also make it easier for the company to cut costs by outsourcing more manufacturing and other operations, while retaining the Sony brand.

Sony has adopted such structures for other business lines, including mobile phones, with mixed results.

In 2001, Sony set up a joint venture with Ericsson of Sweden, but the partnership struggled and Sony bought out Ericsson’s stake in 2012.

Mr. Hirai, the Sony chief, said that while the company had no immediate plans to sell the TV arm, it was keeping its options open.

“There are many possibilities, not just for our TV business,” he said.

William Alden contributed reporting from New York.
http://www.nytimes.com/2014/02/07/te...ing-sales.html
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IMHO - Sony has cooked its own goose. They give up too quickly on new technologies and orphan products that did't meet their bottom line. As an example the DHG-HDD250/500 DVR, which they do not provide support anymore. With that attitude why would anyone want to purchase another Sony product? With the predicament that Sony is in, they will not get any sympathy from me. Too bad, they were once a great company. Both Akio Morita and Masaru Ibuka are probably rolling over in their graves...


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