Sony to Unveil New Strategy in September
Jun 22, 2005
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Consumer electronics giant Sony Corp. will unveil a new strategy in late September to reallocate resources, the company's new CEO said, suggesting it would look to trim its product line-up or downsize struggling businesses.

Howard Stringer, whom shareholders approved as Sony's new CEO, said management would conduct a survey of its sprawling operations over the next few months and come up with a plan that maximizes profitability.

Welsh-born Mr. Stringer and new president Ryoji Chubachi are faced with the formidable challenge of reviving Sony's core electronics division, which has been in the red for the past 2 business years amid intense price competition.

"We cannot fight battles on every front," Mr. Stringer said after Sony's annual shareholders' meeting in Tokyo, Japan. "We have to make choices, and that is why this summer we will get together and decide what the company's priorities ought to be."

The electronics and entertainment conglomerate is in the last year of a 3-year restructuring plan that aims to slash 330 billion yen (approx. U.S. $3 billion) in fixed costs, mainly by cutting thousands of jobs in its electronics division. But many industry analysts have said Sony would need to take more drastic measures to remain competitive with strong domestic rivals such as Sharp Corp. and a growing number of low-cost Asian manufacturers producing low-cost electronics.

Lehman Brothers analyst Yuki Sugi said Sony's stock, which has lost about 5 percent and underperformed the broader market since March 7 when it named Mr. Stringer as CEO, would likely remain weak as investors wait for the new plan.

"While maintaining our longer-term positive view of the company, we think there will be a dearth of stock price catalysts at least until the end of September," Mr. Sugi wrote in a note. The potential for weak earnings in the current quarter to end-June could also weigh on the stock, Mr. Sugi said.

One area in need of repair is Sony's television unit, which lost 25.7 billion yen on an operating basis in the past business year on weak sales of traditional cathode ray tube (CTR) sets and sinking prices of liquid crystal display (LCD) models. The inventor of the Walkman is also trying to regain its footing in the portable music player market where it has been outmaneuvered by Apple Computer Inc. and its popular iPod device and iTunes online music store.

Mr. Stringer acknowledged that it would be more difficult to implement bold restructuring in Japan compared with the U.S., where he oversaw a streamlining plan called "Project USA" that produced significant cost savings by cutting thousands of jobs.

"I know I cannot use an axe in Japan, but we need to change. The world has changed and we have more competitors than ever," he said. (Reuters)

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