Sony’s Hirai Stakes Reputation on Restoring TVs to Profit

March 27 (Bloomberg) -- Sony Corp.’s incoming President Kazuo Hirai put himself in charge of the company’s unprofitable TV unit, staking his reputation on ending eight years of losses. Bloomberg's Jon Erlichman report on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Sony Corp. (6758)’s incoming President Kazuo Hirai put himself in charge of the company’s unprofitable TV unit, staking his reputation on ending eight years of losses.

Sony, Japan’s biggest electronics exporter, abolished two divisions at its main electronics unit and promoted three executives, the company said in a statement yesterday. The changes, effective April 1 when Hirai takes over as chief executive officer, are aimed at speeding up management decisions, said Satsuki Shinnaka, a spokeswoman.

Hirai, 51, who’s been credited for making the PlayStation game business profitable, is bringing in a new team as he seeks to turn around the TV business that’s forecast to lose money for an eighth consecutive year. Hirai has vowed “painful” steps to cut costs and turn around a company facing a fourth straight annual loss amid consumers increasingly flocking to devices from Samsung Electronics Co. (005930) and Apple Inc. (AAPL) for movies and games.

“You can’t just expect any hero to show up and resolve Sony’s problems,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc. in Tokyo.

The Tokyo-based company’s shares gained 2.2 percent to 1,780 yen at the midday trading break in the city. The shares have jumped 29 percent this year, compared with a 23 percent rise for Suwon, South Korea-based Samsung and a 52 percent advance for Cupertino, California-based Apple.

Reshuffle

Sony named Shoji Nemoto, 55, to oversee the company’s technology strategy and its digital imaging and solution units. Kunimasa Suzuki, 51, will be in charge of product strategy, mobile phones and personal computers. Tomoyuki Suzuki, 57, was named to oversee Sony’s chip and device solution businesses.

The maker of Bravia TVs and Vaio computers is abolishing the consumer products and services group, which handled consumer electronics, and the professional device and solutions group, which handled business-use products and components. Sony is creating a medical business unit, to be run by Executive Deputy President Hiroshi Yoshioka, who oversaw the professional device and solutions group.

Hirai, who worked in Sony’s music and entertainment divisions, edged out three other candidates with engineering backgrounds for the top job at the company that was a trendsetter in the 1980s. Hirai will succeed Howard Stringer, 70, who will become chairman of the board after a shareholders meeting in June.

Top Job

Soon after he was named for the top job last month, Hirai reaffirmed his commitment to TVs. The world’s No. 3 maker has a sales target of 20 million sets for the year ending March 31, though the business may lose between 220 billion yen ($2.7 billion) and 230 billion yen.

Televisions are important as an output device, Hirai said last month. “Withdrawing or shrinking would cut a link for customers to experience” Sony content, he had said.

Hirai was born in Tokyo on Dec. 22, 1960. He grew up in Japan and the U.S., graduating from the International Christian University in Tokyo in 1984 with a bachelor’s degree in liberal arts.

After graduation, he joined a joint venture set up in Tokyo by Sony and CBS Inc. The business later became Sony Music Entertainment Inc., Sony’s main music unit.

TV Turnaround

Hirai has already taken action on turning around the TV business. Last year Sony exited a panel-making venture with Samsung. The sale of the stake in the venture to the South Korean company will save about 50 billion yen in cost at Sony’s TV operation.

“Hirai appears to be a person of action as he’s already shown his issue-solving ability in halting investments in the SLCD venture,” said Yuji Fujimori, Tokyo-based analyst at Barclays Plc, referring to the venture with Samsung.

The maker of Bravia TVs has lost ground to Samsung and LG Electronics Inc. (066570), both of which sell TVs profitably. Sony and fellow Japanese television makers Sharp Corp. and Panasonic Corp. (6752) have been crippled by the strengthening yen, which forced Sharp to predict a record 290 billion-yen loss this year.

Besides reforming the TV unit, Hirai needs to break down internal barriers and deliver new products that can win back consumers, Nomura’s Mikoshiba said.

“Sony still has silos. Each section is looking at a different direction and that’s why Sony is struggling to catch up with Apple and Samsung,” Mikoshiba said. “Hirai needs to bring Sony-like products that everyone would want to buy to revive the company.”

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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