Sony turnaround falters
Japanese electronics lowers expectations for the year
TechTrade | 02 Aug 2012 :
Less than three months after announcing its largest annual loss ever but promising a quick turnaround, the company booked a ¥24.6 billion (€252 million) quarterly loss and slashed its yearly profit forecast by a third.
Sony's loss during its April-June quarter was 60% worse than last year, when it was struggling with the aftereffects of a devastating earthquake and tsunami that struck in March. The company said it booked a large loss in its mobile phone division, due in part to the struggles of the former Sony Ericsson mobile joint venture, which it made into a subsidiary in February.
Earthquakes, tsunamis and disgruntled hackers, oh my. Sony has yet to shake off the effects of a terrible year where users deserted its online services over security issues and brands representing better value (Samsung) and better spec (Panasonic) dug into its market share in consumer devices.
If Sony wants to reposition as a more gadget-oriented company it will need to find a way to balance value with novelty, something its current range of Walkman media players is failing to do. Perhaps a change of focus in favour of its professional a/v business would be a smart move. Smarter than going toe-to-toe with Apple and Samsung in the smartphone is, at least.
The company's game division also fell to a loss during the period, as sales of its older PlayStation Portable and PlayStation dropped. Sales of the newer PlayStation Vita increased, but newer game consoles are often sold at a loss or near break-even levels, compared to robust margins on more mature hardware. Its movie business also sank into the red during the quarter.
Sony also cut its annual profit target to ¥20 billion from the ¥30 billion it forecast in May, saying it now expects sales to be 8% lower than it perviously thought. The decreasing expectations evoke memories of last year, when Sony originally said it would make a healthy profit, then slashed its target every three months as it was beset by falling sales amid natural disasters and a hacking scandal, eventually booking the biggest loss since it was founded in 1946.
The latest April-to-June stretch was Sony's first under new CEO Kazuo Hirai (pictured), who previously ran its consumer electronics and PlayStation gaming operations. Hirai has sworn to turn Sony around by refocusing on the sleek gadgets that made it famous. The company once served as the role model for the rivals it is now chasing - recent court documents submitted in a US patent lawsuit between Apple and Samsung show that part of the design process for the iPhone involved creating 'Sony-like' mockups to work from.
Hirai has also said the company will focus on strengths such as its image sensor technology and build out its online service platforms, while shedding other businesses. Sony has made several announcements in line with the rebuilding plan in recent months, including a $1 billion investment in its production lines for image chips over the next several years, the sale of its chemical operations, and a plan to cut around 10,000 jobs, or 6% of its total workforce.
The company has also moved to capitalise on its strong brands, introducing a new "PlayStation Certified" programme approves devices made by other manufacturers to run official PlayStation games, a rare move for the owner of a game console. Taiwan's HTC will be the first to make devices under the programme.
Like many Japanese companies, Sony's financial year runs from April to March.
IDG News Service