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Sony recovery plan is so so

by Mark Tyson on 16 April 2012, 11:12

Tags: Sony (NYSE:SNE), PlayStation3, Sony Computers Entertainment Europe (NYSE:SNE)

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Following the announcement of details of Sony’s big revamp plans late last week, analysts have been able to examine the finer details of the turnaround strategy over the weekend. The result is that they are not impressed.

Last Wednesday Sony announced they would cut 10,000 jobs in the face of record losses of £4 billion in the previous year. Part of the massive losses can be attributed to the buying out of Ericsson as in Sony-Ericsson (approx £1 billion). However this year there will be more one-off costs in restructuring amounting to approximately £600 million. As well as the job cuts the other main focus of the new recovery plan is upon using the Sony DNA to make new products. Sony CEO Kazuo Hirai said: "Sony has always been a company that used its entrepreneurial spirit to create never-before-seen products that stirred curiosity and ushered new eras of entertainment. It is my responsibility to create management foundations that allow each employee to make the most of this DNA within them to address each and every one of the issues that must be resolved ... This is key to the rebuilding of Sony."

Analyst at Mizuho Investor Securities, Nobuo Kurahashi commented “It was the ordinary ‘selection and focus’ strategy... It only gives us uncertainty when the company puts the fields where it is losing at the center of its business strategy. We cannot have high hopes at the moment.” Indeed, on Friday, the markets responded to Sony’s announcements with a substantial 5.5 per cent drop in the share price.

Sony has been losing out in recent years against strong innovative competition from Apple and Samsung. Also relative newcomer HTC of Taiwan has been giving them a run for their money in the smartphone market. Boston University’s Prof. N. Venkat Venkatraman said: “Sony lacks the scale of Samsung. It lacks the cost edge of Samsung and HTC. It needs to develop a vision of media and entertainment to rival Apple and deliver it at a price point that is acceptable to the growth markets (India and China).”

Do users now see Sony less as an innovator and more as a “me too” company? The PlayStation is definitely a component brand Sony can use to make its products differentiated and it has been trying this with the PlayStation certified phones. Microsoft and its Xbox live games via Windows Phone might be a strong competitor in this area soon. In the US video games market Xbox 360 has been the leading seller for the last 15 months in a row. The new Sony PS Vita was doing well but demand seems to be stumbling already.

I remember the good Cyber-shot phones a few years back, the fast usable camera was quite an advantage over many other phones at the time. The Walkman brand has long lost its gloss, possibly because the MP3 players released in competition with the iPod had various niggles; usability, interface software, proprietary memory and file formats. Sony definitely needs to get that DNA working to recover the prestige brand they used to be.

 

New to the UK - red PS3

 

Stop the presses – Sony to release the red PS3 in the UK! I hope there are some more innovative new products coming up from Sony (and I don’t mean more different shades of PS3).



HEXUS Forums :: 5 Comments

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It's interesting to see the struggles Sony are going through at the moment. I do think they have turned into a me-too type company rather than an innovator.

They certainly don't have the Kudos they had 10-15 years ago. It's ironic really because I never really bought into their brand at that time (due to their premium pricing) but I have more Sony kit in my house now than anything else. I think this is partly due to the issues they are having because I've been able to get some great deals on their TV's, Blu-Ray players, Phones and PS3. It works great for me but it's also a symptom of the state they are in that I find they are better value than anyone else!

I do feel they don't really have the premium feel or level of innovation over other manufacturers they previously had. It's hard to say how they can fix this. I think part of what they need to do is to improve their build quality and quality control. The innovation side of things is more challenging but they need to find something. In the past they managed it with products like the Walkman and Playstation but they desperately need something new to improve their fortunes.

I think many of the traditional demographic that previously bought Sony products is probably now buying Apple and this is going to be a pretty hard stranglehold to break.
The problem with Sony, is that they always charge a premium of about 20% on their products. you can quite easily get something with just as good build quality for less. Like Brady says, people that were buying “premium” sony stuff, now like to pay over the odds for apple stuff - ie laptops. They currently just arent in with the mini-driving, iphone owning fashionistas :)
I tend to agree with the above comments that Sony has lost a lot of its previous edge as a fashionable leader in productive innovation. However, above and beyond this I think that Sony has lost the trust of many of its former customers.

I think that Sony can make good products, but quite often it combines these with clunky UIs, proprietary hardware and practices that screw over the consumer (i.e., removing functionality from the PS3; introducing rootkits on CDs; trying to stop consumers ripping CDs on a computer by creating special types of dual session discs).

Ironically, the one I'm looking at upgrading to is the Sony Ericsson Xperia Pro! (I have limited options in the UK for qwerty slider GSM phones.)
I certainly agree with the above comments! Sony have lost what they had in the early 90's? Playstation was ahead of its time but Sony made the mistake of thinking that customers would be there forever………..Sony has to offer real value 4 money if they want to win back market share……….Wow 4 Billion pounds loss is a big loss…….I wonder how the 10,000 employees feel about losing their jobs because of managerial decisions and who is going to re-employ these people?Very sad to say at the very least!
Stop the presses – Sony to release the red PS3 in the UK! I hope there are some more innovative new products coming up from Sony (and I don’t mean more different shades of PS3).

Genius. Pure genius…

And maybe they should try and actually listen to what their customers want for once. Like how about giving PS2 compatibility to the Vita or PS3/4? Nobody is going to jump on a new platform without a solid lineup of games behind it.