Sony’s accelerating retreat from television manufacturing was underscored on Thursday as its new chief executive officer outlined a business strategy that excluded the once-signature product from its “core” electronics operations.
In his first presentation to journalists and stock analysts since taking over as CEO on April 1, Kazuo Hirai said he intended to restore the struggling Japanese group to profitability by focusing on video games, mobile phones and digital imaging products such as cameras and image-sensing microchips.
Mr. Hirai confirmed reports circulated privately by Sony officials that the company, which on Wednesday estimated that it lost a record ¥520-billion ($6.4-billion) in its last fiscal year, would eliminate 10,000 jobs, or about 6 per cent of its global head count, over the next three years.
Sony came to dominate the global television business in the age of boxy analog sets after launching its hit Trinitron series more than 40 years ago. But it has struggled to compete against South Korean and Taiwanese producers in the age of digital flat-screens, and the TV division has lost money for eight straight years.
“Sony will change,” the title of Mr. Hirai’s presentation of strategic and financial targets for the coming three years, echoed a similar declaration made by his predecessor, Sir Howard Stringer, when he became CEO in 2005.
Sir Howard promised to “reinvent” Sony, but was hampered by management infighting and a series of external shocks, including the global financial crisis and Japan’s earthquake and tsunami last year.
Sony’s net loss for the accounting period that ended on March 31 was its fourth in as many years.
Mr. Hirai repeated a vow to make “unavoidable, painful choices” to turn Sony around. He has already made several moves since he took control of the company’s consumer electronics divisions last year, ahead of his appointment as CEO, including cutting a medium-term TV sales target in half, from 40 million units to 20 million, and buying full control of Sony Ericsson Mobile Communications AB, the mobile phone business that Sony shared with Ericsson of Sweden.
Sony has also spun off a division that manufactures small liquid crystal displays for mobile phones and tablet computers into a government-supported joint venture with two other Japanese electronics companies, Hitachi and Toshiba, and is selling another unit that makes chemicals to a state-backed bank.
Mr. Hirai insisted, as he often has in the past, that Sony would continue to sell televisions, describing them as “the centre of the household” and “the most important device for delivering content to customers.”
But he suggested he was considering more-drastic measures to deal with losses from that business if Sony failed to reach its latest target of making it profitable by the fiscal year to March, 2014.
Japanese media have reported that Sony is considering turning over at least some parts of its TV business to a joint venture similar to the one that was created for small displays. Mr. Hirai said Sony had “nothing to discuss” now but was “considering various possibilities.”
Panasonic, Sharp and other Japanese electronics companies are also losing large amounts of money making televisions, and might conceivably be interested in joining forces.
Mr. Hirai said the job cuts and other restructuring moves would cost Sony a further ¥75-billion in one-time charges this year.
But he said the spending would pay off by the fiscal year to March, 2015, when Sony would be generating an operating margin of more than 5 per cent and return on equity of 10 per cent – targets it has been pursuing since at least the middle of the past decade without success.
Copyright The Financial Times Ltd. All rights reserved.