New Sony CEO Says He'll Revive Former Electronics Giant
In the last several years, though, the company has fallen from its high place in the industry. This past fiscal year marked Sony's fourth consecutive without profits. At a news conference last month, his first special event since becoming CEO April 1, Hirai seemed ready to tackle the challenge and help the company through the largest crisis its had in nearly 70 years of business.
But Sony's past missteps suggest that won't be easy.
In an April 10 briefing, the corporation announced the net loss for stockholders would be around $6.4 billion for the fiscal year that ended March 31. This was double last year's loss, and only added to the company's unfortunate track record. Most notably Sony's TV business, which is largely responsible for the company's earlier glory, has had eight straight years of losses.
Over the last decade, Sony’s market share has been radically squeezed by Apple and Samsung who are now 30 times and 10 times larger, respectively, in market value.
So what went wrong? It's been a while since Sony introduced a new mega-hit product. Some theories about the company's downfall have varied from strong Japanese currency to rising global competition. But some Sony senior employees attributed the downward trend to arrogance, a deficiency in innovation and general disregard for Sony’s original spirit.
Many analysts, including some of Sony’s own engineers, agreed the company’s biggest mistake has been its failure to jump on recent big waves in technology—the change from Trinitron TV to LCD TV, for example.
Trinitron used to be the primary technology in television, but lost that status when Liquid Crystal Display (LCD) arrived. With solid research and huge profits thanks to Trinitron, Sony had the tools and means to lead the transition to LCD before its rivals. But the company refused. As Plasma and LCD quickly became popular, Trinitron could only hold onto its prestige until 2006, when Sony competitors like Sharp and Samsung had accumulated enough patents on the next-generation technology.
Similar mistakes happened when Sony failed to embrace digitalization and the Internet over the last 10 years. Now consumers might witness yet another potential mistake in the making.
Though criticized for being slow in the industry’s shift from Trinitron to LCD, Sony still has the top developer who never lost the touch for creating cutting edge technology. In 2007, the company pioneered technology for the world's first ultra-thin TV using organic light-emitting diode (OLED). But just two years after launching its first set, Sony announced it would stop production on OLED models, citing production difficulties and high costs.
South Korea's Samsung and LG stuck with the technology, and successfully developed the 55-inch panel that swept a recent Las Vegas CES awards show.
Compared to its rivals' aggressive approach, Sony has been somewhat conservative, reframing cost-cutting as its main priority. CEO Hirai's philosophy seems to be that cost gaps will keep help Sony in recapturing the TV market.
But his vision has been called into question by industry insiders like Ken Kutaragi, former vice-president of Sony, who described it as “a fatal miscalculation.”
History has shown Sony management’s shortsightedness in technology and markets is not an isolated case. The list of victims includes Airboard, a precursor for the current tablet model, and Felica, a popular radio frequency identification card system adopted by many countries. All of the products were released between 1994 and 2001, the golden time in terms of stock performance.
A Sony researcher who chose to remain anonymous explained what happened. “When we developed the Felica, they (Sony management) didn’t even know how to use it. Soon the technology was sold to JR (Japan Railways) who used it to replace their paper tickets by IC card and made the technology famous. Now everyone uses it, but people barely know it’s a Sony patent.
"We invented it," the employee said, "but someone else appreciated its value.”
Hirai is taking aggressive steps to change that pattern. Two days after the briefing, Hirai began making significant changes to the corporation. First, he axed 10,000 employees, roughly 6 percent of the global workforce, in a Japanese company famous for its tradition of long-term employment.
The company will also shift focus to three main categories: mobile devices including smartphones and tablets; cameras and camcorders; and gaming models. It's an attempt to address Sony's overexpansion in product lines, narrowing in on the changing prioroties in the technological world.
But not included in that list is the product that was so instrumental for boosting the company in the first place: the TV. For the former darling of Sony's business, Hirai said the company will reduce its fixed costs, and make a triumphant return to profitability in 2013.
Contact Staff Reporter Zhao Yang here