Sony CEO Apologizes as PS4 Maker Restructures for GrowthGrace Huang and Marco Lui
Sony Corp. Chief Executive Officer Kazuo Hirai apologized to investors after the company forecast a sixth loss in seven years, and he pledged that his restructuring efforts would fuel the electronics maker’s long-term growth.
“Sorry that we failed to meet shareholders’ expectations,” Hirai said at the company’s annual meeting in Tokyo. “We will bear responsibility to complete restructuring in fiscal 2014, with a strong sense of crisis and without further delay.”
Sony has lost 85 billion yen ($831 million) since Hirai became CEO in 2012 and predicts another 50 billion-yen loss this year as he struggles to revive the television business. The 53-year-old is counting on more restructuring, a slate of “Amazing Spider-Man” films, new Xperia smartphones and potential sales of the PS4 in China to revive its fortunes against Apple Inc. and Samsung Electronics Co.
“There’s only a 50 percent chance that Hirai can complete restructuring this year, it’s not an easy task,” said 83-year-old Tsukasa Kaneda, a Sony shareholder for more than 50 years. “I hope Sony can make great products again, like when the company was first founded.”
Sony American depositary receipts gained 3.3 percent to $16.84 at the close in New York, the most since March 25. They have declined 2.6 percent this year. The shares rose 3.7 percent to 1,705 yen in Tokyo and are down 6.6 percent this year, compared with a 2.6 percent decline in the benchmark Topix index.
The company faces “fierce” competition in smartphones and tablets, and it’s important for Sony to make unique products, Hirai said.
“We can create a new Sony that can take on challenges,” he said.
Hirai was promoted in April 2012, taking the helm of a company that had lost money at its iconic TV unit since 2004. He failed to deliver on promises to turn the unit profitable, and the business now has lost more than 790 billion yen in the past 10 years, according to the company.
“It’s a win-or-lose year for Hirai,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which holds Sony stock. “If he cannot meet his committed numbers, he will lose force as a leader.”
Sony is cutting almost $1 billion in costs after exiting the Vaio personal-computer business. It is targeting 400 billion yen in operating profit by the end of March 2016, spurred by the creation of a new TV business and $300 million in reductions at its pictures division.
The company has cut about 18,000 jobs, including engineers, during the last two years, Vice President Kunitaka Fujita at the meeting, where attendance was half of last year’s gathering.
Hirai said today he is responsible for carrying out the company’s restructuring and that he’s not spinning off the music or entertainment units. Third Point LLC investor Daniel Loeb has urged Sony to spin off a portion of entertainment assets.
So far, Hirai’s plans aren’t impressing individual investor Kido Renate from Germany.
“The shocking thing for me was too many excuses,” Renate said. “Sony is really going down.”
While investors aren’t calling for Hirai’s job yet, they do want the turnaround to show traction after the company cut its earnings three times last year. Sony is now worth about $17 billion, compared with a market valuation of about $120 billion in 1999.
“What Hirai is doing now isn’t wrong, but it is too slow,” said Kazuyuki Terao, Tokyo-based chief investment officer at Allianz Global Investors Japan Co. “The restructuring isn’t keeping up with the speed of change.”
Sony is splitting its TV manufacturing unit into a separate operating entity. The division is focused on so-called 4K ultra high definition sets and forecasts sales of 16 million liquid-crystal display TVs in the year ending March, compared with 13.5 million sets last year.
Global TV sales are getting a boost from this year’s Winter Olympics and soccer World Cup. Sony’s TV sales rose 30 percent to $2.15 billion in the first quarter, according to data compiled by Bloomberg.
Sony’s sale of its PC unit takes effect July 1, with the company booking an 80 billion-yen loss this fiscal year at the unit. Sony previously agreed to sell its PC division, which produces notebooks under the Vaio brand, to buyout firm Japan Industrial Partners Inc.
In smartphones, the company ranks No. 7 globally, shipping 3.2 million units in the first quarter, according to data compiled by Bloomberg. The company is targeting sales of 50 million smartphones this fiscal year, compared with 39.1 million the year before.
There are some positives for Hirai as Sony extends its lead in video games and the film unit rebounds.
The PS4 beat Microsoft Corp.’s Xbox One in U.S. console sales in May, extending its lead for a fifth month, according to Port Washington, New York-based NPD Group Inc. Sony last month took steps toward selling consoles in China, agreeing to form two ventures after the government lifted a 2000 ban on sales of the machines.
“One senses that Sony is building a solid momentum and a viable ecosystem” around the console, said Amir Anvarzadeh, manager of Japanese equity sales in Singapore at BGC Partners Inc. “Sony is doing many, many things right, not to mention its decision to ignore Mr. Loeb.”
“22 Jump Street” topped the box office in its debut last weekend, according to Rentrak Corp. “The Amazing Spider-Man 2” has grossed more than $198 million since its May release, according to BoxOfficeMojo.com. More superhero sequels are scheduled for 2016 and 2018.