Cuts key to Sony strategy

Singer, execs lay out plan for return to profitability

TOKYO -- Cutbacks at Sony are bearing fruit, but a second year of losses means there is "more work to be done," chief executive Howard Stringer warned Thursday at a pair of briefings for the media and investors.
 
“Ownership of both content and hardware gives us an advantage, an example being how Blu-ray won the format battle. Our big movie titles also helped us win the projector battle with 4DK over 2DK,” said Stringer, who pointed out that the two largest US distributors (AMC and Regal) have signed up to install 4DK digital projectors on 11,000 screens, with 3D capabilities on the way.
 
Stringer insisted the new “horizontal group structure” would ensure decisions are no longer taken in isolation. The promise of synergy between contents and hardware, and the breaking down of silos, has been a consistent theme of Stringer’s tenure. He was at pains to point out this was happening now – quoting a game reviewer from the New York Times who had praised the “end-to-end entertainment statement” of “Uncharted 2,” the PlayStation 3, and a 46” XBR9 television.
 
“Driving costs out of the company to rightsize the operations, saving 330 billion yen ($3.7 billion) this year, and targeting a 20% reduction in procurement costs, which last year totaled 2.5 trillion yen ($28 billion),” was also central to the strategy, explained Stringer.  
 
Sony also aims to regain the leading position in the LCD TV market, predicting profitability by 2010, and a 20% market share by 2012, and develop an “evolving TV” concept. These will be screens equipped with “richer internet connectivity”, which will allow for increased after-sales revenue through downloaded contents.
 
The company predicts that 3D products, described by Hiroshi Yoshioka as “a pillar of our strategy,” will bring in 1 trillion yen ($11.2 billion) in sales by 2013.
 
Networked Products and Services division head, Kazuo Hirai, said the company was targeting a further 15% in cost reductions next year to achieve profitability in the group that includes the game division which Hirai previously led.
 
“The PlayStation Network (PSN) online platform is growing strongly and now has 33m registered customers, tripled sales last year, and features 2,417 movies and 15,042 TV programs,” said Hirai.  
 
A new online service, provisionally titled Sony Online Service, is to deliver contents directly to a growing range of connected Sony products, initially utilizing the PSN platform.  Sony is aiming for network service sales of 300 billion yen ($3.7 billion) from 350 million units of networked products, by 2012, according to Hirai.
 
Sony has laid-off 19,500 staff this year.

Sony stock slid 2.2% on the Tokyo Stock Exchange, which closed before the strategy statements, compared with a 1.3% fall for the Nikkei 225 index
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