February 07, 2013

Sony Looks to Mobility, PS4 to Shore Up Flagging TV Division


Sony Corp. may be one of the most recognizable consumer electronics manufacturers out there when it comes to TVs, digital cameras and more, but brand equity alone is not enough to sustain a viable business. However, that’s what it’s coming down to if the CE giant’s latest earnings are any indication. For its fiscal third quarter it posted its eighth straight quarterly loss, forecasting a full-fiscal-year net income of just $213 million. And that is on the back of a real-estate deal: the guidance takes into account the $1.1 billion sale of a New York building.

So what’s going on at Japan’s largest consumer-electronics maker? The building sale will push the TV maker to its first profit in five years, but the future beyond that seems hazy. The company cut sales targets for TVs, PlayStation gaming devices and compact cameras. Total expected shipments of the PSP portable gaming devices in the year ending March have been slashed to 7 million units from the 10 million predicted three months ago and the 16 million forecasted in May.

TV sales pullback is less dramatic but still significant: that was trimmed back to 13.5 million units, from the 17.5 million predicted in May. TV losses led the way for Sony to lose 31 percent of its market value in 2012.

That’s where the building sale comes in. “Having assets to sell is saving Sony,” said Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings Inc., speaking to Bloomberg. “It isn’t really clear yet what can start driving growth.”

Sony CEO Kazuo Hirai is planning 10,000 job cuts—and the company has cut 38,000 jobs in the past year. A weakening Yen also contributes to profits. But these factors and the building sales (more are reportedly planned) are not enough. “Sony is supposed to sell strong products that aren’t reliant on currency swings,” said Yuuki Sakurai, president of Fukoku Capital Management, told Bloomberg. “We need to see those products before we’ll invest in Sony again.”

And to be fair, Sony is focusing on innovation in the high-end TV market. At the Consumer Electronics Show in Las Vegas, it introduced more ultra-definition TVs (including a mammoth 84-inch that will go for $25,000, along with a 55-inch version). It also said that its video hardware player for 4K content will be ready to go commercial in the summer.

The hard-disc server comes loaded with content, including both full-length Hollywood features and a gallery of videos, and a collection of 10 full-length feature films. UD TV customers are to be “loaned” the hardware appliance, Sony said, borrowing a page from pay-TV operators who rely on “loaned” set-top boxes (STB) to distribute content feeds to the TV set. It’s a smart move too, considering that the approach is the only way to get 4K content into consumer hands.

But the UD TV market will be slow, very slow, to take off, so in the meantime the company needs to find other products to rely on for new revenue. To that end Hirai, who has been in the job less than a year, said that going forward, mobile devices will get more attention, perhaps even displacing mainstream TVs (increasingly a low-margin, high-volume business) as its main focus area.

Sony makes Xperia smartphones and tablets, but has failed to gain traction against rivals like Apple and Samsung—Samsung outsells Sony six to one. And the division posted an operating loss of 21.3 billion yen (that’s better than the loss of 48.4 billion yen in the year-ago quarter).

But it will make that mobile-phone business profitable in the year beginning April 1, it said. Part of that will come from new models: it introduced water-resistant phones at CES, for instance. But it also has to work on its form factors and functionality if it’s going to take a bite out of the market leaders.

New hope could also come from gaming: a PlayStation event has been announced for Feb. 20, in which Sony could reveal a PS4 gaming console. That is arguably overdue considering that Xbox 360 and the Wii U have both upped the ante in home entertainment hub functionality in recent months, adding new content and fresh partners.

As it is, Sony's PlayStation 3 is the world's most popular device for viewing movies and TV shows from Netflix on a television—a fact that the company said in December it would exploit going forward.

"PS3 is our largest TV-connected platform in terms of Netflix viewing, and this year, at times, even surpassed the PC in hours of Netflix enjoyment to become our No 1 platform overall," said Netflix CEO Reed Hastings, in a statement. "PS3 is a natural fit for Netflix in terms of developing and first deploying our most advanced features. We can transparently update our application with new features on a daily basis, and through the free PlayStation Network, people around the world can sign up for Netflix directly from their PS3."




Edited by Ashley Caputo



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