Apple Offers Clues to Where Sony Needs to Head: William Pesek
Kazuo Hirai, charged with halting Sony (6758) Corp.’s downward spiral, could be excused for asking: Do I really want this job?
Last week, the consumer-electronics giant said it expects a $2.9 billion loss in the year ending March 31, putting it on course for an unprecedented fourth consecutive year in the red. It’s a stunning reminder of the depths to which the onetime pride of Japan (TPX) Inc. has plunged in the Apple Inc. (AAPL) age.
Thirty-three years after unleashing the Walkman revolution, Sony is playing catch-up to the upheaval wrought by Steve Jobs’s iPod, iPhone and iPad. When Hirai, 51, takes control in April, he must succeed where Chief Executive Officer Howard Stringer, 69, failed. To restore Sony to anything approaching its past glory, Hirai needs a new offering of products that consumers view as game changers.
Indications that Hirai, a Sony lifer, is already tamping down expectations are troubling. The clearest sign is his vow to focus on streamlining the company to restore profitability. The same goes for perpetuating Stringer’s obsession with selling televisions when South Korea’s Samsung Electronics Co. and LG Electronics Inc. are steadily gobbling up market share.
Hirai faces three immediate decisions that Stringer has largely punted forward since taking the top job in 2005.
One, scrap the television unit or fix it. Apple is making a push into TV. If its offerings create even a fraction of the buzz generated by Apple’s phones and tablets -- a safe bet -- can Sony really compete? It has been a decade since Jobs, who died in October, unveiled the iPod, and Sony still hasn’t come up with a globally competitive digital music player. Should investors trust a better outcome with TVs?
Hirai has given signs that he will be the third CEO to pursue an integration strategy. This initiative emerged during the tenure of Nobuyuki Idei, who stepped down in 2005, and gained greater clarity under Stringer, who pledged to tear down the “silos.” These cultural barriers between divisions prevent Sony from marrying content from the acquisitions of Columbia Pictures and CBS Records to its hardware.
It may be time to admit defeat and let others have the TV market. It would free up Sony’s design engineers, once the jewel of the tech world, to focus on other things -- like what comes after flat screens, portable media players and smart phones.
Two, how to thrive in spite of Japan’s moribund economy. Amid China’s rise, Japan is grappling to retain the prestige built during its postwar boom. An impressive stable of globally known enterprises such as Toyota Motor Corp., Sharp Corp. and Sony is mainly what keeps Japan (TPX) on investors’ radar screens.
Yet 2011 was a uniquely dismal year: a record earthquake, a deadly tsunami and Thai floods disrupted supply chains at the same time that deflation deepened, demand fell and the surging yen hurt exports. Political paralysis in Tokyo added to corporate Japan’s woes. Domestic demand will probably be further depressed by a doubling of consumption taxes to 10 percent in the near future.
Japan’s answer lies overseas. The most-celebrated Japanese name of the moment doesn’t make cars, TVs or industrial robots, but low-cost made-in-China apparel. Fast Retailing Co.’s Uniqlo understands that deflation and a shrinking population are long- term trends. Sony should be more aggressive about looking abroad not only to assemble goods more affordably, but to tap new markets.
Three, how to surprise us. Few companies can streamline and cost-cut their way to inspiration. To thrive in the Apple age, Sony needs to reclaim its roots as an incubator of ideas and creativity. Hirai must empower his key deputies to think about destroying old paradigms and divining where the future of technology and entertainment lies. He must act on that vision and do so with the kind of drive and passion that elevated Sony to such lofty heights.
A key question is whether a Japanese leader can thrive where a foreigner didn’t. Stringer was always a Carlos Ghosn experiment. The hope was that the first non-Japanese chief would turn around Sony the way Ghosn, a Brazilian-born Frenchman, did at Nissan Motor Co. No such magic came from the gambit. Instead, Stringer, a Welsh-born U.S. citizen, presided over a 60 percent decline in Sony’s value. If Hirai is to succeed, he must plot a new course and do so amid a corporate culture that is averse to change.
Sony has the talent and the innovative DNA to return to its former glory. Hirai needs to locate it and harness it.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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