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Uphill climb for Sony's new CEO

Posted: 10 Feb 2012 ?? ?Print Version ?Bookmark and Share

Keywords:Kazuo Hirai? TV business? Howard Stringer?

It is going to be an uphill climb for Sony Corp.'s new CEO, Kazuo Hirai. Right after he was named to succeed Howard Stringer, shares of the company went down 1 percent. Hirai is set to replace Stringer in April this year.

Sony has just posted a $2.1 billion (220 billion yen) net loss for October through December, a period that would normally be boosted by year-end holiday sales. Last year was particularly challenging for Sony and other Japanese companies. They had to face a weak economy, the great March 11 earthquake that crippled the country's electronics industry and supply chain issues that were brought about by the flooding in Thailand.

Hirai is a Sony veteran but leading the ailing electronics giant is not going to be easy. Although he is known for his role in reviving the company's PlayStation business, how Hirai will take Sony out of the red is another question.

"I have a very strong sense of crisis about the environment surrounding us," Hirai said in a press conference. "We cannot be afraid to make painful choices for the future of Sony. Our rivals and the operating environment won't wait for us."

He added, "The path we must take is clear. To drive the growth of our core electronics businesses, primarily digital imaging, smart mobile and games; to turn round the television business; and to accelerate the innovation that enables us to create new business domains."

Sony was once known for its innovative flair, coming up with the Walkman personal music player in the 1980s and the PlayStation in the 1990s. Hirai needs to recapture this spirit and regain lost ground from competitors, such as Apple and Samsung, whose mobile phones and tablet offerings are dominating the market.

With his track record, some analysts believe that Hirai will be able to bring back Sony to its glory days. They say he has the know-how to breakdown the silos within the company and make these units work together.

"They have been grooming him for a while," said Dan Ernst, an analyst for Hudson Square. "I think he will carry on the plan for Sonyas difficult as it is."

Others on the other hand are less optimistic.

Kim Young-Chan, analyst at Seoul's Shinhan Investment Corp. said, "It won't be easy for Sony to regain its lost ground under new leadership, as its overall competitiveness has sharply weakened."

"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 areafrom TVs to displays, tablets and smartphones," noted Young-Chan.

Bringing TV back
The first order of business for Hirai is to revive the Sony's TV unit as it now lags behind South Korean rival Samsung.

There have been suggestions of Sony to pull out of the market as the business has yet again posted billions of losses in sales. But this is not the direction Hirai wants to go. As a sales-boosting effort, he plans to merge the company's rich roster of entertainment properties with its Vaio, Bravia and other electronics brands. Sony owns film franchises, such as "Spider Man" and "Men in Black," as well as songs of Kelly Clarkson and Michael Jackson.

"There's still a chance in home electronics and I don't think Sony should quit TV's, but unfortunately I can imagine the day may come when they will pull the plug on the business," said a former engineer and executive at Sony. "This is because when you keep making losses and you have no fresh ideas, that becomes the easy choice," the former executive added.

Sony's chief financial officer, Masaru Kato, said Sony aimed to halve losses on flat TVs in the next financial year from April, when as a company it hopes to make an operating profit of about 200 billion yen.

Hirai also singled out medical as a potential core business for the future, but he declined to comment on any possible investment in troubled endoscope maker Olympus Corp.

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