Following the announcement of details of Sony’s big revamp plans late last week, analysts have been able to examine the finer details of the turnaround strategy over the weekend. The result is that they are not impressed.
Last Wednesday Sony announced they would cut 10,000 jobs in the face of record losses of £4 billion in the previous year. Part of the massive losses can be attributed to the buying out of Ericsson as in Sony-Ericsson (approx £1 billion). However this year there will be more one-off costs in restructuring amounting to approximately £600 million. As well as the job cuts the other main focus of the new recovery plan is upon using the Sony DNA to make new products. Sony CEO Kazuo Hirai said: "Sony has always been a company that used its entrepreneurial spirit to create never-before-seen products that stirred curiosity and ushered new eras of entertainment. It is my responsibility to create management foundations that allow each employee to make the most of this DNA within them to address each and every one of the issues that must be resolved ... This is key to the rebuilding of Sony."
Analyst at Mizuho Investor Securities, Nobuo Kurahashi commented “It was the ordinary ‘selection and focus’ strategy... It only gives us uncertainty when the company puts the fields where it is losing at the center of its business strategy. We cannot have high hopes at the moment.” Indeed, on Friday, the markets responded to Sony’s announcements with a substantial 5.5 per cent drop in the share price.
Sony has been losing out in recent years against strong innovative competition from Apple and Samsung. Also relative newcomer HTC of Taiwan has been giving them a run for their money in the smartphone market. Boston University’s Prof. N. Venkat Venkatraman said: “Sony lacks the scale of Samsung. It lacks the cost edge of Samsung and HTC. It needs to develop a vision of media and entertainment to rival Apple and deliver it at a price point that is acceptable to the growth markets (India and China).”
Do users now see Sony less as an innovator and more as a “me too” company? The PlayStation is definitely a component brand Sony can use to make its products differentiated and it has been trying this with the PlayStation certified phones. Microsoft and its Xbox live games via Windows Phone might be a strong competitor in this area soon. In the US video games market Xbox 360 has been the leading seller for the last 15 months in a row. The new Sony PS Vita was doing well but demand seems to be stumbling already.
I remember the good Cyber-shot phones a few years back, the fast usable camera was quite an advantage over many other phones at the time. The Walkman brand has long lost its gloss, possibly because the MP3 players released in competition with the iPod had various niggles; usability, interface software, proprietary memory and file formats. Sony definitely needs to get that DNA working to recover the prestige brand they used to be.
Stop the presses – Sony to release the red PS3 in the UK! I hope there are some more innovative new products coming up from Sony (and I don’t mean more different shades of PS3).