TOKYO: Ailing Japanese electronics giant Sony Corp warned it was heading for a bigger-than-expected $2.9 billion annual loss, presenting a daunting task for incoming CEO Kazuo Hirai, who vowed to move quickly to turn things around.
Overtaken by more innovative rivals such as Apple Inc and Samsung Electronics over the past decade, Sony posted a disappointing $1.2 billion operating loss for October-December, normally a lucrative quarter with the Christmas and year-end sales, as it battled a strong yen and flooding in Thailand that ruptured supplies and a weak economy.
The company’s forecast for a 220 billion yen ($2.9 billion) loss for the year to March, its fourth straight year of red ink, was close to double what the market had expected, and revealed the task ahead for Hirai, who takes over as CEO in April.
“It won’t be easy for Sony to regain its lost ground under new leadership, as its overall competitiveness has sharply weakened,” said Kim Young-Chan, analyst at Shinhan Investment Corp in Seoul. “It’s got structural problems that will take years to fix.
“It’s not just Sony, but Japanese IT firms have similar problems. They are failing to innovate and produce industry-leading products in almost every major area - from TVs to displays, tablets and smartphones.”
Sony kept its forecast for annual sales of 20 million LCD TVs, but trimmed the number of digital cameras and PlayStation 3 consoles it expected to sell.
For the next financial year, starting in April, Chief Financial Officer Masaru Kato said Sony aims to make an operating profit of about 200 billion yen, halving its TV losses and operating at a 5 percent margin. The TV business was forecast to lose 220-230 billion yen this year.
Hirai, a Sony veteran who revived the PlayStation gaming business, is being promoted to stop the rot in the troubled TV business and to rekindle the innovative spirit that made Sony a king of the global consumer electronics industry in the 1980s and into the 1990s.
Sony shares closed down 2.6 percent ahead of the results on Thursday in a broader market that rose 0.8 percent.
“Sony has few businesses that have value. In short, it has failed to change,” said Hisashi Kuroda, general manager of equity investment at Meiji Yasuda Asset Management in Tokyo.
“One silver lining is that governance is working and they realised the company was shrinking but not developing.”
There is unlikely to be a honeymoon period for Hirai, who is under immediate pressure to sort out the ailing TV business after it fell behind South Korean rivals such as Samsung in a market where prices are tumbling.
Above all, Hirai will strive to recapture the innovative flair that led Sony to come up with the Walkman personal music-player in the 1980s and the PlayStation in the 1990s, and regain ground lost since then to Apple and Samsung whose iPhones, iPads and Galaxy gadgets are snapped up by consumers.
Some analysts believe Hirai - 51, tall, urbane and a fluent English speaker - can rekindle the flame, saying he has a good grasp of the overall business and is likely to know how to break down its silos and integrate its divisions. “He’s a convergence executive in a convergence world,” outgoing CEO Howard Stringer told reporters. Others are less sure.
“The biggest issue is top management ... There needs to be a vision for the products, for innovation,” said a former Sony executive who felt that a new management mindset was needed.
He told Reuters he believed Sony would ultimately shut the TV business unless it came up with fresh ideas to revive it. “There is still a chance in home electronics, but I imagine the day may come when they will pull the plug on TVs,” he said.
Hirai sketched out his priorities in a statement late on Wednesday after his appointment was announced, saying Sony needed to drive growth in its core electronics businesses, such as digital imaging, games and mobile devices, turn around its TV business and accelerate innovation.