Howard Stringer's turnaround of Sony (NYSE: SNE) is officially over. The first non-Japanese executive to lead the company was hoping to fix what the old rigid culture at the company had broken. It no longer had the leading edge in making innovative consumer electronics. Its gaming platform, the Playstation, was losing ground to rivals. Its studio business was costly, and, in the view of many, poorly run.
Stringer was going to fix all of that, and seemed to have made a modestly good start. Then, the recession mowed him down. Sony will cut 8,000 people in the hope of saving over $1 billion a year. The "downsizing" is 5% of the firm's global workforce.
Analysts will fairly wonder if the jobs might have been saved if Sony had made any real progress on picking up market share for the PS3 and making the game division more profitable. The company was certainly hurt by the falling prices of LCD TVs, which is among Sony's largest businesses.
The fact of the matter is that Springer's renaissance at Sony took too long. By the time the recession hit, he was still in the early innings of trying to make the company successful again. Now, he has been set back, perhaps by several years.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-09-2008 @ 6:35PM
Walt Sindewald said...
Sony cuts to the bone??? Hardly. Not even close. 8,000 jobs is only 5% of the worldwide work force and the "cuts" are spread out into early 2010.
Other considerations:
1) Sony electronic products sell at a premium due to the Sony brand name, but it still has profit margins less than its competition such as Samsung, Nintendo, etc.
2) Sony always blames its profitability woes on the exchange rate situation but this is nothing new. Sony has had to deal with that situation for decades.
3) Anyway, like most international companies, Sony hedges on the currency market.
4) Also, while a strong yen impacts their sales values (in yen), most of that impact is buffered, because the products Sony sells are primarily imported to the U.S. (from low cost countries).
5) No, the problem is primarily one of too much overhead, and too little discipline in continuous cost improvement.
6) Since, the first of the year, Sony stock prices have declined by close to 65% while the S&P500 has declined by about 40%. Of course, Sony sells to a consumer market which has taken a big hit and have to deal with the exchange rate problem. But so do Nintendo, Panasonic and many other quality Japanese companies. Their stock prices haven't fallen anywhere near what Sony's stock has. So what's the problem? Poor cost management.