Sony is spinning off more of its struggling units so it can focus on growth businesses like entertainment, video games and camera sensors. This won't bring back the embattled company's glory days, when its reliable, cutting-edge TVs, music players and other products attracted a huge global following. But it should help stanch the bleeding.
Starting in October, the electronics giant will park its video and audio activities in a separate but wholly owned subsidiary that will be left to its own devices.
Sony did the same with its floundering TV business last year and ditched its personal computers. It has also essentially thrown in the towel on its smartphone unit, which has been buried by more powerful rivals Apple and Samsung, as well as low-cost competition from generic Asian makers.
A better plan would be to sell off the deteriorating assets.
"Management has no choice. It has to act," says Francis McInerney, managing director of North River Ventures in New York and an expert on restructuring in Japan's electronics sector. "I don't buy this separate subsidiary stuff. In Japan, the thinking goes that there are only two buyers: South Koreans and Chinese. Both are anathema to Japan. So instead of just unloading the thing, it remains on the consolidated statements."
In theory, though, it means Sony can devote more resources to three core areas it has identified as critical to its return to strong growth and profitability – its PlayStation gaming business; entertainment content, including television and movie production and music; and image sensors used in everything from smartphone cameras to self-parking vehicles and smart eyeglasses (Google may have abandoned the concept for now, but not Sony).
"The strategy starting from the next business year will be about generating profit and investing for growth," Sony chief Kazuo Hirai told reporters in Tokyo.
None of this will have an immediate impact on Sony's top or bottom lines. Indeed, it expects to end up in the red for the fiscal year ending March 31, to the tune of ¥170-billion ($1.78-billion), its sixth net loss in the past seven years. That's 26 per cent better than an earlier estimate, mainly thanks to a weaker yen.
Investors appear to like the latest moves, part of a restructuring that has seen thousands of un-Japanese-like job cuts. Mr. Hirai is now aiming to reach an annual return on equity of more than 10 per cent in three years and an operating profit of no less than ¥500-billion. That compares with an estimated ¥20-billion for this fiscal year.
Despite modest progress, it was yet another annus horribilis for Sony, marked by an impairment charge of ¥180-billion related to its fast-fading smartphone business, the cancellation of its dividend and an embarrassing hack attack against its Hollywood studio arm that resulted in not-yet-released movies being posted online. It also exposed plenty of dirty industry laundry.
Sony estimates the cost of that assault at $15-million (U.S.), but computer experts say the tab is likely to run much higher. And that doesn't include the damage to its reputation.
Looking ahead, Sony faces a tough climb to get back on the track to consistent profits.
Among its other shortcomings, the company is "almost cloudless," says Mr. McInerney, author of Super Genba: Ten Things Japanese Companies Must Do to Gain Global Competitiveness. "The one cloud piece it has is the Playstation and the company is now trying to expand what PS touches. But it has nothing to match Apple's app base or North Carolina servers."
Indeed, he points out that Apple made more money in its most recent quarter than Sony has from 1999 to now.
Sony, like many other large Japanese industrial companies, "is having its Kodak Moment," Mr. McInerney says, referring to the spectacular fall of the U.S. corporation that invented digital photography but failed to understand the revolution it spawned.
If that's true, Mr. Hirai ought to be checking whether his golden parachute is airworthy.