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Sony Dumps PCs, Splits TV Op, Cuts 5,000 Jobs

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Bert22306
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Not like this hasn't happened before
Bert22306   2/6/2014 8:32:57 PM
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US CE companies like GE, Magnavox, Admiral, RCA, Westinghouse, Stromberg Carlson, Fisher, and a whole host of others, have had to get out of the CE business and either reinvent themselves or disappear entirely. Sony is dealing with that same problem.

My thinking was that Sony could get involved in this IoT field and in smart cars. Both require new sensor types, so their interest in sensors could make a good fit. I agree that they don't need to keep making boxes. For example, Qualcomm, some years ago, stopped making boxes and started building only chipsets. So even this type of reinvention of a name brand is not novel.

Yes, it's a huge change for Sony, but hardly unprecedented. Why should Sony be immune to this, might be a better question. The CE business is extremely competitive. Sony's products were always priced higher than the competition, so it's not surprising that competing against the newest low bidders, China/Taiwan and Korea, was going to be difficult.

junko.yoshida
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Re: Not like this hasn't happened before
junko.yoshida   2/7/2014 5:11:45 AM
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@Bert, you made an excellent point here. Many of these erstwhile CE brands in the U.S. you mentioned here either disappeared or re-invented themselves. So, why wouldn't Sony be able to pull that off?

krisi
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Re: Not like this hasn't happened before
krisi   2/7/2014 10:31:49 AM
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Junko, Bert, I agree it can happen...but you have to be willing to embrace a dramatic change, come up with a vision and accept the losses (both financial and in workforce) to do that....I don't see the vision component in Sony and layoff are traditionally difficult in Japan...I would not bet my money on Sony...Kris

resistion
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Wow TVs too
resistion   2/7/2014 4:24:51 AM
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I also bought Sony TV before too. Seems may be more than just PC demand problem now.

Sensing sounds promising. But do they have the right resources for it.

junko.yoshida
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Re: Wow TVs too
junko.yoshida   2/7/2014 5:18:14 AM
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@resistion, that's a good question. Does Sony have the right sensing technology? I don't know. Well, they can always buy what hey need, too. But you are asking a better question. Do they have "the right resources" ( to acquire what they need, identify apps, find partners and customers, and pull the team together)? It remains to be seen.

alex_m1
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virtual reality
alex_m1   2/7/2014 6:37:56 AM
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It's too early to exit CE. Virtual reality could be a very big industry.There a lot of excitment from gamers and others.

 

And Sony is building a VR headset.Reviews say it's far better than occulus rift, the other commercial competitior, and it comapres to Valve which is has the best research prototype(and doesn't intent to market it). And sony could use it position in gaming to grab a big share.

But since the PS4 is relatively underpowered for virtual reality(it's only powerfull as a mid range pc) , that means sony will have to face some difficult strategic choices.Will it sacrifice PS4 for the next market ? . It would be interesting to see how this plays.


BTW 150,000 is the number of employees accross sony electronics,entertainments and finance. How many are there in electronics ?

prabhakar_deosthali
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Re:
prabhakar_deosthali   2/7/2014 8:15:34 AM
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Seems like Sony is following the way IBM exited from all kind of PC and server hardware business.

But Sony has to decide fast which way it wants to reinvent itself . Sony has been known as a consumer electronics company - TV, cameras, Laptops and the smartphones.

Not sure how it will cope with the new wave products like wearable devices and IoT stuff.
 

zewde yeraswork
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Re:
zewde yeraswork   2/7/2014 10:00:43 AM
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Yes, whatever direction Sony chooses to take they have to start setting off on that path soon. Obviously, they aren't going to be a box maker for much longer, and they are ready to get out of the PC business. Sensing could be an interesting lading place for them. Still,t he fact that their workforce is too big currently is a concern. That's going to drain a lot of resources until they make the cuts they have to make.

cookiejar
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Another Kodak?
cookiejar   2/7/2014 12:34:59 PM
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Just like Kodak, Nortel and Blackberry, Sony posses a lot of IP, but is dying in market sales.

When you are a market leader in technology, you get used to the large margins that allows you to cover your development costs plus a healthy profit.

Once your technical lead diminishes significantly, it becomes almost impossible to meet customer expectations for performance at the lower market prices.  How can Sony adjust to the new world after enjoying market leadership for half a century?

Sony's major killer apps came from its founder, greatly diminishing after his passing.  Sony also has its entertainment business.  Apple's killer apps came from the late Steve Jobs.  Apple also has iTunes.  Quite the parallel.


There's a lot of technology and business presented to China on a platter by IBM among others.  Is this becoming the standard path of Western and now Eastern technology companies?

DMcCunney
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Re: Another Kodak?
DMcCunney   2/7/2014 2:51:23 PM
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@cookiejar: When you are a market leader in technology, you get used to the large margins that allows you to cover your development costs plus a healthy profit.

Sorta.  The problem in the consumer electronics undustry is that today's advanced technology rapidly becomes tomorrow's commodity product.  You can make good money with a market lead, but sooner or later (probably sooner), competitors jump in, your product becomes one of many, and competition devolves to price.

Sony made money for a while in PCs when the Vaio line was hot, but it takes more than a brand name to maintain profitability.  When PCs reached the point where it largely didn't matter whose name was on the box, Viao was doomed, because it didn't offer anything you couldn't get cheaper elsewhere.

Likewise, Sony made money in big screen TVs in the early days when they were the must have product and everyone was trading up.  But sooner or later (and again, probably sooner), everyone has traded up, the market is saturated, and you can't charge a high enough price to make money.

What has me scratching my head about Sony it that it has been through this boom and bust cycle many times, and should expect it.  When you're in the CE business, you need an exit strategy.  You need to know when you need to fold your hand and walk away from that particular table because further bets will be losses.

I don't really understand why Sony didn't exit the PC business well before now, and why they stayed in TV as long as they did. It's not like they haven't been through this before, and there weren't warning signs that the roof would fall in.

junko.yoshida
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Re: Another Kodak?
junko.yoshida   2/7/2014 3:05:13 PM
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@DMcCunney, as usual, an excellent analysis.

You wrote:


What has me scratching my head about Sony it that it has been through this boom and bust cycle many times, and should expect it.  When you're in the CE business, you need an exit strategy.  You need to know when you need to fold your hand and walk away from that particular table because further bets will be losses.


That, indeed, is the crux of the issue. Japanese are actually terrible at coming up with the worst case scenarios. (Sorry for this broad generalization, but it is true). Rather than getting ready with an exit strategy, they'd rather keep doing what they've been doing for a long term with "stronger commiments."

Sony, however, did go for "a diversification strategy" when the time was good. The company bought a record comany and a film studio (great asset but affected by hits and misses). The company also got into the financial service business in Japan.  The financial service business -- selling insurance as such -- is doing well, by the way.

But then again, rather than bringing back a focus to the company, Sony ended up with a sprawling business, and they believed in their own hype about "synergy" of software and hardware. 

DMcCunney
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Re: Another Kodak?
DMcCunney   2/7/2014 4:03:27 PM
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@junko.yoshida: @DMcCunney, as usual, an excellent analysis.

Thank you.

You wrote:

What has me scratching my head about Sony it that it has been through this boom and bust cycle many times, and should expect it.  When you're in the CE business, you need an exit strategy.  You need to know when you need to fold your hand and walk away from that particular table because further bets will be losses.

That, indeed, is the crux of the issue. Japanese are actually terrible at coming up with the worst case scenarios. (Sorry for this broad generalization, but it is true). Rather than getting ready with an exit strategy, they'd rather keep doing what they've been doing for a long term with "stronger commiments."

I suspect his may be rooted in the same cultural factors that led to a tradition of lifetime employment in Japan, until the global economy reached the point where that was simplty no longer possible.

My understanding is that before everything, Japanese are members of groups, and derive pretty much everything including identity from group membership.  It's what makes layoffs especially traumatic: the laid off worker is not merely losing his job, he's being cast out of his group. Stories of laid off salarymen commiting suicide are unsurprising, because the trauma runs much deeper than job loss.  (And Japan lacks the sort of support mechanisms Western economies have developed to handle such things, because up until a few decades ago, there was no need for them.)

Given the above, no real surprise at being poor at coming up with worst case scenarios.  Japanese management style is consensus oriented and to a large extent bottom up.  In that structure, it can be next to impossible to reach a decision that survival of the overall enterprise requires cutting off a limb.  How do you sell that to those working for the limb you need to amputate?

Diversification was certainly a valid move.  Part of the issue with CE is that your fortunes rise and fall with whether you can produce a continual stream of new must-have products that everyone wants to buy.  The last big one was the big screen TV.  3D TV was supposed to be the follow-up, but that's been disappointing.  Sony isn't the only CE firm that has been savaged when it didn't have another ace up its sleeve. 

(Another is Apple computer, though it's not exactly losing money.  Apple got a stock price in the ionosphere from growth provided by the iPod, iPhone, and iPad.  But the high end of the msartphone and tablet markets is arguably satureated, so where does further growth come from?  Because it didn't have a followup category defining product waiting in the wings, the market said "There won't be further groth", and hammered the stock price.)

Where Sony goes next is an interesting question.  They could, indeed, get out of making boxes, and simply license technology to those who do.  But that's a very different business model, requiring far fewer people, and arguably rather lower revenues, even if it has higher margins on them.  While Sony might be healthy when it's done, it will be a lot smaller, and current restructuring expenses will be a fraction of the total needed to do that.

For better or worse, I suspect Sony really needs to come up with a new product based on the sensing technology they've developed, that they can make and sell.

 

 

 

Curie_US
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Apprentice
Re: Another Kodak?
Curie_US   2/13/2014 2:51:04 PM
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WAIT a MINUTE HERE!  Are y'all telling me that SONY is gonna get out of the TV business too?  IF that happens, where am I gonna get a new picture tube for my 1983 26" SONY floor model TV that still performs flawlessly?

Is this the same SONY, as in "SONY, the ONE & ONLY!"????

DMcCunney
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CEO
Re: Another Kodak?
DMcCunney   2/13/2014 4:06:13 PM
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@Curie_US: Are y'all telling me that SONY is gonna get out of the TV business too?

Yep.  Things like that happen when the market changes and you can't make money doing something.  Sony is losing a bundle on TVs these days, and pretty much has to exit the TV market if they want to stay in business.

I'm not sure you can get a new picture tube for your 1983 floor model now.  I suspect Sony stopped making them over 20 years ago.  Maybe it's time to trade up?

Curie_US
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Apprentice
Re: Another Kodak?
Curie_US   2/14/2014 7:50:31 AM
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HOW can I "trade up" IF they ain't gonna make no more TV's?????  I hear these new-fangled sets ain't no good, and they don't last but about 5 years or so.....

What's an old-timer like me gonna do???

Actually, we don't watch much TV... it's NOT uncommon for our SONY to stay unused for days on end.  There's virtually NOTHING being broadcast that is worth our watching, since we're in between baseball season, although pitchers & catchers are scheduled to report to Spring training today, and workouts start tomorrow.....

MOST of what I originally posted was done "tongue in cheek".......

ADIOS!

lakehermit
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Rookie
Re: Another Kodak?
lakehermit   2/7/2014 4:02:00 PM
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The problem with relying on IP to survive is that it can no longer be protected. Large multinational companies, mainly with overseas manufacturing operations where human rights and intellectual property laws are often ignored, are now lobbying Congress to gut US IP law under the guise of getting rid of patent trolls. The truth is that Congress is throwing the baby out with the bath water. Legitimate developers of cutting edge technology will no longer have a market where they can sell their cutting edge technology at a profit without having to compete with unscrupulous copyists who no longer fear having to pay the penalty for their theft. Consumers worldwide, factory workers, factory owners and the economy in general will all suffer because all that will be available will be commodity products with stale technology which are manufactured to the cheapest level of quality for a minimum salable product.

DMcCunney
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CEO
PCs, TVs, and eBooks...
DMcCunney   2/7/2014 2:37:32 PM
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And as a minor side-light of the restructuring, another affected Sony division is the eBook reader operation.  Sony had already announced their latest Reader model would not be offered in the US.  Now they've handed over theit Bookstore operation to Kobo:  http://www.digitalbookworld.com/2014/sony-and-kobo-join-forces-for-ebooks-in-u-s-and-canada

It remains to be seen whether Sony will stay in the Reader business, but my guess is no.

mostadorthsander
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who will take the lead...
mostadorthsander   2/7/2014 4:38:58 PM
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as with many engineering firms...sony may have jumped on the electronics bandwagon when it became for successful and mainstream...sony needs to make bold statements in various optoelectronics industries ranging from consumer to healthcare...there still is no clear government regulatory standards for engineering sciences such as televisions...the future is really wide open for sony...will the magnitude of the task at hand lead to sony's destruction...or will sony skillful navigate and create a eternal juggernaut future...a rose by any other name will still smell as sweet...unless it is the perspiration bath of the rose....

krisi
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CEO
Re: who will take the lead...
krisi   2/7/2014 5:08:11 PM
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"the future is really wide open for sony"


what makes you say that???


mostadorthsander
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Rookie
Re: who will take the lead...
mostadorthsander   2/7/2014 5:17:22 PM
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any engineering firm worth's its metal can create infinite wonderous products...it is just a matter of marketing and sales...

analogtechnologies
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Re: who will take the lead...
analogtechnologies   3/17/2014 5:20:34 AM
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Hi, we have about 4 cubic yard of concrete chunks/pieces, no rebar. Come and pick up, free + we will help you loading + pay your $20 reward per truck load. Our yard has a gate just off the road. We are located on the corner of Parkwest Drive and Vallejo Drive, San Jose, 95130, close to Westgate Mall. web:www.analogti.com

mostadorthsander
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Rookie
1990 sony stereo receiver
mostadorthsander   2/7/2014 5:32:11 PM
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I remember buy a sony stereo receiver with sliding graphics equalizer and was amazed...

mostadorthsander
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Rookie
sony set up an arm in the chaos plains of the usa
mostadorthsander   2/7/2014 5:35:01 PM
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come to new jersey sony...and we will work with you...

betajet
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CEO
Sony makes great hardware
betajet   2/7/2014 6:04:05 PM
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While Sony makes great hardware, IMO they really shot themselves in the foot over the OtherOS capability which allowed PS3 to be used as a powerful compute engine until Sony took the capability away.  The open source community remebers things like this, and advise everybody they know to take their custom elsewhere.  JMO/YMMV

In the meantime, maybe Sony can make enough Raspberry Pi boards at their Pencoed, Wales facility.  I hear that those boards are a lot better made than the ones manufactured in China.

 

_hm
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CEO
Harakiri by random acquisitions
_hm   2/8/2014 6:23:28 AM
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Sony and many other wonderful organizations pays price for harakiri committed by past management by acquiring others without much logic. It was mad rush following that usual wrong American wisdom.

Most of them are paying price after decade or so. They also suffocated other nice smaller dynamic organizations by acquiring them.

 

ANVARZADEH
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Sony
ANVARZADEH   2/9/2014 6:04:52 AM
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As a long term follower of the business, for the first time in 10years I can see a ray of hope with Sony's general direction. I agree that Sony must shrink. As does Nintendo. But unlike Ninty whose games have been greatly marginalised by launches of thousands of free titles a month on iOS and Android platforms, and killing the DS, Sony's early move towards beefing up its core gaming follwers has left it somewhat unscathed.

Although its easy to dismiss Sony's game business as a box making unit, its the Playstation brand as a gaming network platform, its worth a lot more. They now look to easily beat their 5mn target for PS4 for the term ending March while software/hardware tie ratio of 2.3x looked solid enough. TVs in unit terms grew YoY for the first since god knows when. Most important of all PS4 users need to subscrobe to PS Plus gaming network to play online, By March 15 when accumulated unit sales hit 20mn or so, revenues from Ps Plus could hit 100bn and OP as much as Y50bn. 

The company is shifting its entire electronics biz towards high-end, low volume segments. From smartphines to TVs. This is nit a bad strategy as the move, if nothing else, enhances the brand as they move away from the commodity high volume sweetspot. Abandoning the TV business at this very late stage, when TVs are all becoming network centric and PS Network has over 100mn subscribers (granted that many of which are dormant) could be a mistake. 

It would have made sense 10 years ago but given that they have held on thus far, capitulating here might not be so wise. Q3 was the first time in years when Sony actually posted YoY unit growth in their TVs. Losses will undoubtedly shrink dramatically from here as the company cuts the four global TV factories to at least half and go super high-end.

Its image sensors is obviously making big money for them with OPM of +20% ane the firm is ramoing up output aggressively towards 70K (300mm) wafers p.m. Its less talked about battery business is also being dramatically restructured (took a Y30bn impairment charge on that) as Sony shifts towards only Li Polymer where margins are solid, and growth rising as device makers adopt the li Polymer battery technology for thinner gadgets. 

Its picture business is also shifting focus from as you say, hit or miss and costly films towards more TV production where costs are lower and visibility far better. Breaking Bad was a huge hit them with TV content sales up 60%. Sales of to other networks also grew 25% YoY. Even its film business which had tough hurdles to clear from the Bond film managed only a 12% YoY drop in Q3 revenues. Its financial segment also posting solid growth thanks Sony Bank and Sony Life, providing vital cash flow for the group, Sony looks to be nicely positioned for a sustained profit recovery. 

 

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