Sony Abdicates TV Production for Mobiles

Sony chief executive officer Kazuo Hirai plans to win back customers from Apple by concentrating on mobile devices, games and digital imaging, and televisions are not on his list.

Hirai is falling back on products that made Sony a trendsetter in the 1980s before competition with Apple and Samsung Electronics pushed it into four consecutive losses, culminating in the announcement that the company will cut 10,000 jobs.

Sony fell the most on Japan’s benchmark Nikkei 225 Stock Average Thursday after unveiling the plan, which includes a one-time charge of 75 billion yen for restructuring costs this fiscal year.

The emphasis on three “core businesses” comes after Sony lost 714 billion yen on televisions in the past eight years as demand for its Bravia models slumped.

Hirai will cut costs at the TV unit and reduce the number of models to reach the same profitability target set by former CEO Howard Stringer in 2005.

“The market’s expectation about Sony is for the company to again become a creator of the Walkman,” said Yuuki Sakurai, chief executive officer at Fukoku Capital Management, which oversees $7.4 billion in Tokyo. “That’s a tough goal as the times have changed.”

Sony fell 5.3 % to 1,447 yen, the lowest intraday price since February 3, and traded at 1,473 yen in Tokyo on Thursday. The Nikkei 225 advanced 1.5 %. The decline trimmed Sony’s gain this year to 6.4 %.

“The flag that is flying is unchanged and reads too little, too late,” Edwin Merner, president of Tokyo-based Atlantis Investment Research, which manages $300 million, said by email. “They must focus on only a few businesses, sell off, close the other businesses.”

Sony wants to “revitalise and grow” its electronics business under Hirai’s new management plan, it said in Thursday’s statement.

The initiatives include bolstering the digital imaging, games and mobile businesses; turning around the TV division; expanding in emerging markets; creating new businesses and accelerating innovation; and realigning the business portfolio.

Asked what the company would do if the TV business didn’t return to profit by the targeted March 2014, Hirai said it’s “natural for us to consider various contingencies”. Sony is the world’s third-largest TV maker.

“We naturally need to consider what to do when the business turns profitable as we planned and what to do otherwise, not to mention we also need to consider courses of action to take in each case,” Hirai said, as Bloomberg stated.

Hirai -who took the top job this month after earning a reputation for turning around the PlayStation game business- said in February it was “very difficult to imagine Sony getting out of the TV business.”

Cupertino, California-based Apple, maker of the iPod and iPhone, will debut a TV within a year, Brian White, an analyst at Topeka Capital Markets, wrote earlier this month.

Sony plans to strengthen the three segments so they generate 70 % of revenue and 85 % operating profit at the electronics operations in the year ending March 2015, the company said on Thursday.

The job cuts announced Thursday will include employees expected to be transferred outside of the group as part of the sale of businesses and other realignments, Sony said.

The company has cut 66,500 jobs in four restructuring plans since 1999, according to Keita Sanekata, a spokesman for the company.

Sony, worth more than $120 billion in 2000, is now valued at $18 billion, compared with $581 billion for Apple and $165 billion for Samsung.

Japan’s biggest consumer-electronics exporter plans to raise its operating-profit margin to 5 %, have a return on capital of 10 %, cut fixed costs at its television operations 60 % and consider an alliance on batteries for electric cars, it said. In 2009, Sony announced a push back on the target.

“I wonder if Sony will accomplish the target figures as Sony doesn’t tell how to reach them,” said Yoshihiro Okumura, who helps manage the equivalent of $365 million at Chiba-Gin Asset Management in Tokyo.

“The management might be too optimistic on its sales and profits, so more and more investors doubt the ability of Sony’s management.”