Can Sony's new supremo make the sacrifices to save his biz?

We drill into the uphill battle ex-Playstation boss Hirai faces

Comment When Faultline first began following Sony in 2003, it was worth $36 billion on the stock market. At the time Apple was worth $9.8 billion and it was about to launch the iTunes Music Store. We said that Sony should buy Apple and put Steve Jobs in charge.

Of course it was whimsical, Apple and Jobs in particular would never have agreed to such a deal, and never wanted to run such a divided corporation as Sony. It was suggested more to highlight Sony's growing need to act before it was too late and before Apple became a dominant force.

In Apple we see the company that Sony dreamed it was in the middle of becoming. It had, up until this time, all the major new ideas in consumer electronics, and it had a healthy game franchise -plus a massive, if unprofitable, electronics business based mostly on TV leadership.

But since then Apple has improved its value by a factor of 40 or so, while Sony has merely managed to halve its value - and is forecast to lose $2.8bn in its latest financial year.

Now a lot of water has flowed under the bridge since then, and we don‘t plan to go over it all here again in detail. Sony lost its leadership in TVs, mostly due to its loss of leadership in the underlying technologies and its reliance on Samsung LCD screens, but also because of its insistence that it has a Rolls Royce product and basic overpricing. All of this was brought about by paying too much for components and being tied into long-term component streams.

Howard Stringer focused throughout his term as CEO on the integration of all the major Sony businesses, and seeing through plans to cut its component costs. The result is that Sony is worth less today than when he took it over. The Sony Stringer presided over cared too much about keeping its Japanese jobs, too much about appearances, and not substance, and staying in all of the businesses it was traditionally in.

This week Sony announced that Stringer would be kicked upstairs in its traditional route for moving out CEOs to the chairman's post. It has brought in Kazuo Hirai, starting in April, as the next CEO, opting once more for a Japanese native to run the business. Stringer was brought in from the outside, supposedly to bring US know how (he is British, but his prior career was in the US) to a peculiarly Japanese business. Instead he spent his time acquiring the Japanese constraints that have hampered Sony for a decade – looking after Japanese interests first, not those of shareholders.

But in appointing Hirai, despite the fact that Stringer will be there to see that none of the initiatives that he began are sidetracked by the newcomer, there is an opportunity; although we have to expect Sony to squander the opportunity once more, it is also a chance to get it right once again.

We all know that Sony needs to leverage its content businesses – film and music – to drive its device businesses – handsets, game consoles, PCs, smart TVs and tablets and other handhelds, as well as cameras. We also know that it has singularly failed to achieve this under a succession of leaders because some managers of the various divisions of Sony fail to do as they are told. If you tell a movie studio to give Sony devices an edge, you invariably damage profit at the studio, and it's not a trivial problem to solve.

Let's see if Hirai can bang some more heads together and go beyond the vision of Stringer - taking the business further and creating a global content network which all Sony devices can tap into. If the company was to sell off unprofitable divisions, and focus solely on profit, with no in-fighting, then this can be done. But it will need an exceptionally strong man, with a tough no-nonsense vision, who is prepared to sacrifice people and products and do things his way. We'll see.

Copyright © 2012, Faultline

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