Wednesday, April 11, 2012


A very good friend of mine sent me this a few minutes ago:
You need to write on Sony's preannounced loss.

I replied:
Hell, I have to write about it every three months, because they keep
doubling it.

Here are the basics:
TOKYO — Sony more than doubled its projected net loss for the past financial year to ¥520 billion, its worst loss ever, as an additional tax expense hurt a company already battered by heavy losses in its television business, a strong yen and natural disasters in Japan and overseas.

That's $6.4 billion dollars. And here's more:
Mr. Kato said that tepid sales of TVs, especially in the United States, Sony’s biggest market, were hurting profitability most at the manufacturer. But he also blamed the strong yen, which has battered Sony’s profitability abroad, as well as the lingering effects of damage from the tsunami in Japan last year and flooding in the manufacturing hub of Thailand.

Sony bet the farm on televisions. For fiscal year 2010, they forecasted 60% growth (which I roundly mocked), and incredibly wound up growing at 43%. That's truly impressive, even though it was well below forecast, but then Sony doubled down and forecast 20% growth (off a much larger base) for fiscal year 2011.

Here's the television unit ramp:
FY08: 15.2M
FY09: 15.6M
FY10: 22.4M
FY11 (projected): 27M

That forecast was revised after the holiday quarter when sales were actually lower than last year. And when I say "revised", I mean from 27 million units to 20 million, which is massive. So they bet the farm, and have apparently lost the farm.

It's not that Sony doesn't make nice televisions. They do. It's just that a bunch of other companies do, too, and Sony has never competed well on price--when they've been forced to, they fail. They need to be able to charge a brand premium, and there's just no real premium associated with the Sony brand anymore.

Ironically, if there is ever a company that should be able to capitalize on "synergy", it would be Sony. Sony music and entertainment streamed to Sony phones, televisions, computers, and videogame consoles. Sony creates entertainment and also creates the hardware for viewing that entertainment.

Right now, though, nothing seems to be working. Sony is basically a highly profitable insurance company with many unprofitable side-businesses.

I think the question right now is how is Sony going to change? Clearly, they can't continue along this path, but I see no clear avenue for them to succeed.

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