International -- Int'l Business: JAPAN
NOBUYUKI IDEI'S BIG IDEA (int'l business)
He's pushing Sony into PCs to save its consumer-electronics lead
When he handed over the presidency of Sony Corp. nine months ago to marketing expert Nobuyuki Idei, Chairman Norio Ohga vowed to keep one hand on the steering wheel of Japan's best-known company. But faster than anyone imagined, Idei has elbowed Ohga aside and steered the company into uncharted terrain where consumer electronics and computers merge.
As Idei sees it, if Sony doesn't move quickly to embrace this digital revolution, U.S. computer makers will steal its lead in consumer electronics. This would happen as surely as Sony and other Japanese companies snatched the business from the Americans in the 1970s. "We're at the end of a great technological cycle," a hoarse but self-assured Idei proclaimed at the company's New Year's bash in mid-January in Tokyo. But if Sony can combine its audiovisual knowhow with computer networks, Idei believes, it will be in the vanguard of "an entirely new industry."
CUTTHROAT BUSINESS. Idei's conclusions may not sound original. But the president deserves credit for moving more aggressively than any of his predecessors, despite enormous risks. In November, he enlisted Intel Corp. to help Sony enter the cutthroat personal-computer business, where Sony faces a new set of tough competitors. U.S. companies are already rushing to add audio and video functions to pcs.
Meanwhile, Sony's Japanese competitors such as Sharp, Casio Computer, and Canon are sprucing up their cameras, organizers, and other gizmos with computer and communications features. And fleet Southeast Asian upstarts have become versatile players in both types of electronics. Says Chuck Goto, managing director of Smith Barney International: "[Sony] may get pushed aside, if they don't watch out."
Still, Idei argues that Sony's ability to supply key pc components--from cd-roms and digital cameras to Trinitron monitors and digital video disks (dvds)--will keep it a few steps ahead of the horde. It will also smooth its entry into pcs. "We're not only an assembler like [Taiwan's] Acer," he says. Even if profits in pcs are thin, "we can enjoy a very stable business."
Sony will aim its new pcs squarely at the home market. This year, the company will ship two or three Windows-based models with price tags below $2,000. They'll come bundled with Trinitron monitors and, possibly, dvd players. Sony will ship a notebook computer in 1997 and will develop personal digital assistants--machines similar to pocket organizers but much more powerful. Junichi Kodera, senior managing director in charge of pcs, hopes for sales of 1 million units by 1999.
DESPERATION MOVE? Judging from Sony's success in video games, that goal sounds almost modest. Sony launched its Play Station, a 32-bit cd game player with better graphics than most pcs, in 1994. It has already shipped 3.4 million units.
Critics dismiss Sony's move into pcs as a desperate act with no promise of profits. But that misses the point, Idei argues. He isn't going head-to-head with Compaq Computer Corp.: He's building in-house technical skills that will help Sony preserve its core hardware business. That's why Idei decided to pack a Tokyo-based design team off to San Jose, Calif., where it is able to work more closely with Intel. Sony also has research labs in California developing custom chips for new digital products. And a reorganization announced on Jan. 16 aims to spread computer expertise across Sony's entire product spectrum. Bolstered by sales of industrial components and a weaker yen, group net profits could grow 80%, to $1.2 billion, in the year ending March, 1997, Smith Barney's Goto reckons.
None of this soothes the sting of Sony's ongoing disaster in Hollywood, where managerial missteps have led to staggering losses. Idei moved quickly to fire Michael P. Schulhof, the ineffectual president of Sony Corp. of America. But he still resists selling Sony's studio. The fact is, Hollywood remains a sideline for Sony. By shoring up computer skills to keep the bloom on Sony's consumer products, Idei is already grappling with the company's biggest challenge.By Steven Brull in Tokyo