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Sony Set To Announce Major Restructure Tomorrow, Will TV’s & Smartphones Survive?

Sony is seriously looking at restructuring their consumer electronics business spanning TV’s, online content and mobile phones as unit sales of all major hardware products are tipped to fall in the coming year.

The Japanese Company who recently appointed Kenichiro Yoshida as their new CEO is set to make a major announcement late Tuesday, concerning the future of Sony and at this stage it’s not known whether TV’s and smartphones will survive the restructure.

It’s tipped that he is keen to grow recurring revenue businesses as opposed to selling hardware that only deliver “wafer thin margins”.

Yoshida is set to unveil a three-year plan on Tuesday that embraces Sony’s growing reliance on income from gaming subscriptions and entertainment, whether Sony made devices are part of that strategy are at this stage unknown.

Bloomberg said that the transition is already happening: even though the company sold fewer hardware products such as televisions, digital cameras, smartphones and PlayStation consoles in the year through March, it was able to post record operating profit.

Investors have applauded the transformation that’s been under way since Kazuo Hirai took over as CEO in 2012, with the shares climbing more than five-fold amid a turnaround.

“Yoshida is clearly sending a signal that recurring revenue from the content business, software, services, and subscription segments are important,” said David Dai, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “That’s what is going to drive growth and also sustain growth.”

The PlayStation 4 gaming console is nearing the end of its lifecycle and the company’s Hollywood division is notorious for swinging between blockbuster hits and big flops claims Bloomberg.

The big question is whether Yoshida, who was chief financial officer before his promotion, can make a clear and compelling case for growth in online content, recurring subscription revenues and intellectual property licensing.

Other questions for investors include how aggressively Yoshida plans to spend Sony’s growing cash pile to acquire more content, whether a merger of movies and music under a single entertainment unit is in the cards, and if game streaming will be central to the PlayStation 5.

Another key area of concern is Sony’s semiconductor business, which supplies mobile-camera chips for iPhones and other mobile phones. Operating profit for that business is seen declining 39 percent in the current fiscal year, partly due to one-time charges but also amid sputtering global demand for smartphones.

On Tuesday, after Yoshida kicks off Sony’s investor relations day at 9:30 a.m. in Tokyo, all eight of the company’s divisions will present their mid-term strategy though 2021.

Those presentations will most likely stress the resilience of Sony’s content businesses.

Profits from the video-game unit are up, even amid a 20 percent drop in PS4 hardware sales, thanks to recurring revenue from PlayStation’s online network. Paying subscribers for the service have jumped 64 percent over the past two years to 34.2 million.

Sony Reaps $2 Billion From Online Gaming with members paying $60 a year to play multiplayer games on PlayStation 4

Sony’s online TV service PlayStation Vue continues to bleed money. The service lost access to ABC, CBS, Fox and NBC affiliated stations over a contractual spat this month. In late 2016, it dropped Viacom stations, leaving subscribers without Comedy Central and MTV.

Outside of games and chips, which together generated almost half of all earnings last year, Yoshida is likely to talk about the rising importance of intellectual property and patent licensing. Last week, Sony spent $185 million to buy a 39 percent stake in Peanuts Holdings, the owner of the Snoopy brand.

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