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Frank Eory
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CEO
Re: The demise of Sony
Frank Eory   8/2/2013 2:23:53 PM
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There are valid arguments on both sides. If Sony can better capitalize on synergies or collaboration between the CE side and the media content side, then shareholders stand to beneft. But if it cannot, should a mortal wound in one operation be permitted to cause the demise of the other operation?

Charles Hansen
User Rank
Rookie
Re: What new platform?
Charles Hansen   8/2/2013 1:12:57 PM
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Junko wrote, "In a number of big technology changes anticipated in the next few years -- like 4K and 8K in TV for example...."


OMG, is this what we're reduced to? Why don't we just turn the WayBack machine to 1958 in Detroit, where "innovation" consisted of longer tailfins each year?

Progress in CE is now a race to how many pixels we can cram down the consumers' throats? 1080p is enough for anything up to at least 60" diagonal.

I suppose there are some people that want to live like the Jetsons (or was it really the Montag's house in Truffaut's adaptation of "Fahrenheit 451"?) with an entire TV wall so we don't even have to go outside where there is pollution and crime and other nasty "real" things that we don't really want to see....


But for pity's sake, 8K? Please tell me that you're joking. Please?

DMcCunney
User Rank
CEO
Re: What new platform?
DMcCunney   8/2/2013 1:05:47 PM
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I can see why the activist hedge fund manager wants Sony to split: he has the possibility of making a lot of money.  Whether it's a good idea long-term for Sony is another matter.

There is actually a correspondence between Sony's hardware and entertainment side.  Both are hit driven.  If you don't have hits for a while, you can go out of business.  The problem is that product development costs so much.  If you are a movie studio spending up to $100 million to make a film, you better have a few blockbusters in your lineup to cover the losses on the films that tank.  If you are a CE manufacturer, likewise.

Sony had that problem in the hardware side. They got into trouble, along with Panasonic and Sharp, in the big screen TV business.  Big screen TVs were the "must have" product that supported much of the CE industry for a while, and the industry has been casting around looking for the next one.  (3D TV, anyone?)  Sony and the rest invested enormous amounts in the facilities need to make them.

For a while, Sony and others were in clover, generating large revenues and high margins as the market all bought big screen TVs.  But like other CE devices, big screen TVs became commodities.  The high margin high end of the market got saturated.  Sales moved to smaller and lower end models, with lower prices and much lower margins.  The Japanese manufacturers simply couldn't compete in the lower end with folks like Samsung.  It was a "lowest cost producer wins" game, and the Japanese outfits weren't and could not be the lowest cost producers.

This "boom-and-bust" cycle is intrinsic to that sort of business.  The question for Sony is that they didn't grasp the cyclic nature, and see the handwriting on the wall.  I'd argue they should have seen the end coming, and been winding down and preparing the exit the big-screen TV business well before they racked up billions of yen in losses on it.  New markets for new products are all very well, and you can make a lot of money addressing them.  But sooner or later, everyone has that new product.  Then what do you do?

I think Sony needs to take the hit and fold the TV operation.  I am not convinced splitting the hardware and entertainment sides into separate entities is the best long term solution.

junko.yoshida
User Rank
Blogger
Re: What new platform?
junko.yoshida   8/2/2013 12:24:26 PM
Tom, I am not recommending  hardware companies (like Apple) to buy software giant (like Disney) -- as a way to become profitable. It is a hard business model to pursue.

However, here's the reatlity.  Sony already owns the entertainment biz.

Unbundling it now won't help restore Sony. In a number of big technology changes anticipated in the next few years -- like 4K and 8K in TV for example, knowing the next move by studios (or what they want to do) could help the hardware business. Or vice versa. I think it's high time for Sony to leverage the knowledge, relationships and connections it has accumlated with the entertainment business to create a new business model or platform.

Not the other way around. (Throwing out the software business and going back to be in a no-value-add, low, low margin CE hardware business.)   

 

 

Tom Murphy
User Rank
Blogger
Re: What new platform?
Tom Murphy   8/2/2013 11:06:27 AM
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Junko;

You're proving my points.

1. If the hardware business is precarious, and the entertainment earnings are irregular, then the volatility in the entertainment business actually poses a risk to the electronics group. And why should the hardware business be a drag on the enterainment group, which needs to have a healthy cash balance to support it through the typical downturns of flops.

2. I never said it was limiting distribution; I said it can't. Most hardware companies understand that they want to provide platforms, not entertainment content. Your example: Steve Jobs understood that without having Apple buy a big enterainment company.

3. Loeb's interest is what it is: he's an investor. He wants to maximize returns. Maybe shareholders -- who own the company -- should have a choice of whether they want to own both the hardware and entertainment businesses. If the company is split into two, they'll have stock in each and can retain it or sell it at their choice. 

Think of it this way: Disney and Apple are both great companies. But if you wanted to buy Disney shares, would it be fair to make you also buy Apple shares?  You should have the choice. IMHO, so should the shareholders at Sony.

(BTW, I don't own any of those three stocks. This is just my honest opinion.)

 

 

Susan Rambo
User Rank
Blogger
Re: Negativity
Susan Rambo   8/2/2013 10:33:58 AM
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The one good thing about asking a dumb question is it still counts. Employees should pay attention to what the CFO says in public. Not that he's saying anything different to them in private.

kfield
User Rank
Blogger
The demise of Sony
kfield   8/2/2013 10:26:19 AM
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It's been impressive to see the fall of a consumer electronics giant like this - but there have been plenty in its wake, namely some of the big American names in consumer electronics of the 20th Century. 

alex_m1
User Rank
CEO
Re: What new platform?
alex_m1   8/2/2013 8:34:11 AM
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If they can gather exact second by second knowledge on how people watch their content, and correlate this knowledge to both the big and small details of said content, they could probably produce better content. That is what Netflix does.

junko.yoshida
User Rank
Blogger
Re: What new platform?
junko.yoshida   8/2/2013 7:36:31 AM
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I couldn't agree with you more, Ogemaniac. Look what happened to Elpida; look what happened to Renesas; look what's going on at Sharp.

While many of those Japanese companies' failures can be traced to the poor management, making the company [Sony] deliberately weak for the purpose of the hedge fund's gain doesn't strike me particularly as a smart move.

junko.yoshida
User Rank
Blogger
Re: Negativity
junko.yoshida   8/2/2013 7:32:30 AM
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@susan, because he has obligations to tell the truth to Sony's sharehlders. More than anyone else, Sony knows that Sony is not out of the woods, and doesn't want to mislead the market.

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