Consumer electronics giant Sony posted more than a billion dollar loss last fiscal year,
forcing the company to restructure and reduce its workforce by 5000 employees. It also looked at segments of its business that were unprofitable to determine its options. Sony’s personal computer line, VAIO, was once popular in the PC market; however, it has now become a drain on resources due to mounting losses, forcing Sony to discontinue the product line. Unfortunately, there are still a lot of diehard consumers who love that product line, my wife included.
Sony reached an agreement to sell its PC business to the investment firm Japan Industrial Partners (JIP) on July 1. From the 1100 employees currently affiliated with the VAIO division, 230 will transfer to the new company, 430 are expected to accept early retirement packages, and the remaining displaced employees will transfer to other business units within Sony. Sony still plans to support existing customers. JIP plans on downsizing as it tries to turn the PC into a viable growing business. It has no immediate plans for expansion from new technologies or new product launches.
Sony was the leader in the personal mobile electronics industry for years. Its products were unique and innovative, and included the portable transistor radio, Trinitron color TV, the Walkman, Video Consumer Recorder (VCR), and electronics game consoles along with many electronic games. It created new benchmarks for competing electronics companies throughout the world. Sony was king for many years until it was knocked off the throne by a little product from Apple called the iPod.
The 21st Century has a new electronics leader - Apple. There are only four products in its portfolio – the PC, MP3 (iPod), tablet PC (iPad), and the smartphone (iPhone). Apple’s strategic business plan is to link each of these unique products with each other. Once a customer purchases an Apple product, their tendency is to purchase another because a combination of products will create more value. Apple appeals to a broad range of customer ranging from toddlers to senior citizens. Each one of them will remain loyal to Apple, and will upgrade their devices with each product update.
Sony has many more product lines than Apple, but its products do not link as well. New products are developed and commercialized independently from each individual business divisions. It seems like Sony is throwing a lot of mud against the wall hoping some of it will stick. If one in 10 of the new products released can be successful, the company can generate income for the next five years. Unfortunately, Sony has not successfully released any new product during the past 15 years.
Sony plans to remain in the smartphone and tablet PC business. It hopes some new ideas will win over the Apple consumer; however, its products are not very innovative and cannot stand up to Apples dominating presence in these two markets. Sony is not a small venture firm and one successful product launch cannot rescue the company. Sony’s management team needs a long-term business plan. It can only bleed for so long.
Dominique K. Numakura, This email address is being protected from spambots. You need JavaScript enabled to view it.
DKN Research, www.dknresearchllc.com
DKN Research Newsletter #1418, June 29, 2014 (English Edition)
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Headlines of the Week
1. Hitachi Maxell developed a new thin film sticky tape (25 microns thick). It makes expensive touch-screen materials recyclable.
2. Panasonic developed a new polypropylene resin “Full Bright” with high light reflection rates for LED light source applications.
3. Nippon Sheet Glass developed ultra thin glass papers down to 20 microns thick as the separator materials of fuel cells and next generation secondary batteries.
4. Toray developed a high sliding textile material based on the fluorinated fiber “TOYOFLON” for motor and generator applications.
5. JDL has been preparing volume production of the touch sensor embedded LCD panels for high resolution tablet PCs.
6. Panasonic developed a plastic resin recycling process, that separate three kinds of resins from mixtures with a higher speed than traditional processes.
7. Tokyo University developed a new low cost manufacturing process to construct LED display modules on glass substrates.
8. Tohoku University developed a new nano crystal base soft magnetic material. It will reduce electric power loss significantly.
9. Showa Denko completed an expansion of its high purity gas supply network for semiconductor manufacturers in Asia.
10. Philips entered into the street lighting market in Japan introducing LED lighting device “GreenVision Xceed”.
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