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Sony moves on with synergy exit

Posted: 20 Feb 2015 ?? ?Print Version ?Bookmark and Share

Keywords:content-hardware synergy? CMOS? image sensors? TV? Return on Equity?

Sony is on a roll cleaning out its electronics business units. Last year, the company ditched its PC business, while TV became a separate company. Come October this year, its audio and video business will split into two.

On the brink of the Mobile World Congress scheduled in less than two weeks, Kazuo Hirai, Sony CEO, said he would not "rule out considering an exit strategy" for the company's mobile phone unit, Reuters reported.

In essence, Sony is pulling a Motorola.

After all, dumping unprofitable business units isn't that hard. However, in Sony's case, the exit has taken much longer than some investors were hoping. The hard part, after all that liquidation, is to rebuild the company in some form that won't look like a skeleton of its former self.

But when it comes to Sony (not Motorola), my first thought is: Thank goodness, Sony's finally forsaking its delusional "content-hardware synergy" theory.

Almost 10 years ago, I talked to Nicholas Carr, author of "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage." He then bluntly said that synergy "hasn't worked" for Sony. "Companies tend to delude themselves about the power of synergies between different businesses." The former executive editor of the Harvard Business Review told us, "The synergies are theoretical, but the conflicts are real." Well, that was back in 2005.

Many experts questioned for years if the rigorous demands of consumer electronics and supporting silicon can ever mesh with the often nebulous culture of movies and music creation. Now we know, it's better to focus on one, rather than both.

Now is not the time to wax nostalgic, but gone are the glory days of the radio and TV technologies that Sony co-founders Masaru Ibuka and Akio Morita created to build their company. What's left is a lot of side businesses Sony started after the co-founders left.

This hodgepodge includes video games, music and movies, and device business represented by Sony's CMOS image sensors.

The device business doesn't exactly seem to fit the puzzleif Sony's new strategy intends to focus on software.

Nonetheless, the CMOS image sensor is just about the only product category left in hardware where Sony still sees a big growth opportunity. Sony holds a lion's shareabout 40 per centof the global market for CMOS sensors. They are designed into Apple's iPhones and other smartphones, digital cameras and tablets. Behind Sony are California-based OmniVision and South Korea's Samsung Electronics, each of which holds roughly 16 per cent, according to 2014 forecasts released by Techno Systems Research, a research group.

Just as Sony is planning to spin out its audio/video business (represented by Walkman, DVD players, audio accessories, etc.) as a separate subsidiary in October, Sony is likely to do the same with its device division including image sensors in the future, according to CEO Hirai, the Financial Times said.

Unlike Motorola, after shedding all of its electronics business units, Sony still has Spider Man, Grand Auto Theft V and a small galaxy of pop stars to entertain us. That's a saving grace.

Back to silos

As a reporter covering Sony for so many years, most puzzling to me is how practically every business strategy, corporate slogan and objective touted by Sony over the years failed to stick.

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