TOKYO Sony Corp may finally be serious about restructuring, setting aside up to $1 billion this fiscal year to cut staff, but the hard-nosed figures in its latest results still include noticeably rosy forecasts.
While some parts of the company still cling to the old habits of over-promising, a group of newly appointed, no-nonsense executives is hinting that, in time, the divisions behind products like Bravia televisions and Xperia smartphones will also be brought round to reality.
Sony missed the forecasts it set for its TV and smartphone divisions last year as it struggled to compete with more nimble rivals. This year, it is still targeting sales growth of 20 to 30 percent for both divisions, a rate that is several times the average expectations for those markets.
It also said it would earn a profit on all five of its electronics categories after three units notched up losses last year, raising eyebrows among analysts.
"When they forecast profit in each product category, it worries me," said Atul Goyal, an analyst at Jefferies in Singapore, adding it was possible that Sony's smartphone and TV sales might actually fall by 20 to 30 percent instead.
"There are many things happening on the competition side in the product categories in these mature markets."
Sony, like compatriot rival Panasonic Corp, could end up shrinking in key consumer markets - a strategy once unthinkable for a brand synonymous around the world with consumer electronics.
Sony, which makes the PlayStation game console, Cybershot cameras and audio equipment, is due to outline its strategy on Thursday for the year at a briefing chaired by Chief Executive Kazuo Hirai.
Sony announced in February that it would pull the plug on its Vaio PCs, the first time it quit a major consumer product line, after a decade of assorted restructuring efforts chipped away at factory headcount but left its expanding office workforce largely untouched.
"There may be some cases where we have no choice but to get out of a certain business. We're aware of that risk," a senior Sony executive said last week after the company forecast a 50 billion yen ($493 million) net loss for this financial year.
The executive spoke on condition of anonymity.
"I think Philips should be a benchmark for us," he added. "They really turned around their business structure. They exited TVs. They quit chips. That transformation was brilliant. I don't mean we would quit the same products but we should treat them as a benchmark in terms of changing our business structure."
Dutch electronics firm Koninklijke Philips NV focuses on lighting, healthcare and consumer lifestyle products including kitchen blenders and fryers.
Spearheading Sony's shift is Kenichiro Yoshida, who was appointed chief strategic officer in December and chief financial officer in April. As Hirai's closest confidante, he replaced the two top lieutenants appointed by the previous CEO, Howard Stringer.
Hirai also appointed Hiroki Totoki as corporate planning director. Both executives said last week that while it was too early to say if Sony would scale back or exit any businesses, they weren't ruling anything out.
Totoki said the company had a number of options for its TV division, which has posted losses for 10 years running and will be split off into a separate company this summer.
"For example, we might collaborate with another company if there are mutual benefits, although there is nothing concrete that we have decided on or that we can talk about," he added.
Asked at the meeting whether Sony would still be in the TV, smartphone and camera business in three to five years, when his term as CFO ends, Yoshida said: "At this point it's too early to decide whether they will remain or not."
"We are not at the stage where we can say these areas are no good because their profitability is low."
Sony's total $1.35 billion restructuring budget for this year, which includes the costs of the Vaio exit, exceeds the $700 million Yoshida said it spent on average every year over the last decade for restructuring.
Yoshida demonstrated his pragmatic side when he projected a net loss for Sony for the year to March, the first time the company has started a financial year with such a forecast since April 2009, at the peak of the global financial crisis.
Three of the four years since then have ended in the red despite Sony initially forecasting a profit for all of them.
The strong sales targets, however, highlight just how far Sony needs to go in convincing its own managers to get real.
At the analysts briefing last week, Yoshida acknowledged the TV and smartphone divisions faced risks.
Asked whether he thought the sales targets were appropriate, he said: "To some extent, we're seeing that we can cope if TV volumes shrink. In smart phones there are risks, as you point out, so we'll monitor them very carefully."
($1 = 101.3450 Japanese Yen)
(Editing by Edmund Klamann and Miral Fahmy)
Trending On Reuters
The Competition Commission of India (CCI) has accused Google Inc of abusing its dominant position in online search, people with knowledge of the matter said, which if proven could force the U.S. company to alter its practices in a key market or even pay a big fine. Full Article