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

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DMcCunney
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CEO
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. 

lakehermit
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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
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.

 

 

 

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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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...

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.

 

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