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Sony Skidding Along The Bottom After Poor CES Show

Sony Skidding Along The Bottom After Poor CES Show

Analysts at CES 2015 told ChannelNews that the brand equity
once valued by consumers had “disappeared” and that Sony was today a
“struggling” brand who “desperately” needed a
“hit” product.

CEO Kazuo Hirai is due to report his fourth quarter earnings
with insiders tipping either a joint venture or a complete exit from key
markets.

Recently Hira was struggling to come to grips with yet
another hacking attack on the Hollywood studios of the Japanese consumer electronics
giant.

Now he is preparing yet another new business revival plan.

One option being considered is a joint ventures for its
money-losing TV and mobile phone operations similar to what Philips did with
their TV and sound businesses.

Sony, which has cut its earnings forecasts six times on
Hirai’s watch, forecasts a $1.9-billion (U.S.) net loss for the business year
to March, and will suspend dividend payments for the first time, after deep
smartphone losses.

Sony management recognises that “no business is forever,”
one source told Reuters. Although no deals are on the table, “every segment now
needs to understand that Sony can exit businesses,” he added.

Last year Sony sold its Vaio personal computer business and
spun off its TV operations, cutting 5,000 jobs in addition to the 10,000
slashed earlier after Hirai took over.

But even as many analysts say further drastic action is
needed, such as a full-fledged exit from TVs, Hirai used last week’s
high-profile Consumer Electronics Show in Las Vegas to push an array of new
gadgets, including a super-slim TVs and a $1,500 Walkman digital-music player.

He stressed the success of Sony’s imaging sensors for
cameras and its PlayStation 4, saying the company has sold 18.5 million of the
game consoles, putting it ahead of Microsoft’s Xbox One and Nintendo’s Wii U.

Sony has refused proposals for aggressive action before,
such as a 2013 demand from influential hedge fund manager Daniel Loeb to spin
off part of its profitable entertainment business to fund an overhaul of the
struggling electronics operations.

As he prepares the latest revival plan ahead of the new
business year, Hirai, 54, must decide what to do with the financially weak
operations that have already been subject to heavy cost cuts.

He told reporters at the Las Vegas show that his reforms
have succeeded “in some parts but not in others.”

“Electronics in general, along with entertainment and
finance, will continue to be an important business,” he said. “But within that
there are some operations that will need to be run with caution – and that
might be TV or mobile, for example.”

Yet cost cuts and a focus on high-end phones, a strategy led
by Hiroki Totoki, the new chief of Sony’s mobile division, aren’t enough, said
Citigroup analyst Kota Ezawa.

“The mobile and TV businesses both require a drastic
overhaul,” he said. “Without drastic reforms such as joint ventures or
alliances, they will both be in the red three years from now.”

Exiting the TV business would mean heavy restructuring costs
and lost sales. Potential buyers might not want all the division’s assets, let
alone at a high premium.

Japanese rival Panasonic has succeeding in shifting focus
from TVs and DVD players to growth areas such as advanced driver-assistance
systems and high-margin home appliances under CEO Kazuhiro Tsuga, who took
office around the same time as Hirai.

“Anyone can make TVs these days,” Tsuga said after browsing
rival booths at CES. “But you see this in smartphones too, not just TV.”

The same predicament forced Nokia to sell its mobile phone
business to Microsoft and Sony’s former JV partner Ericsson to sell its stake
in 2012.