Sony outlines aggressive growth goals

CEO Howard Stringer described recent restructuring successes and plans for the future

Sony has spent years struggling to adjust to the digital age but its chief Howard Stringer Thursday sought to make the case that it has found its footing.

The president and CEO outlined a number of positive achievements and laid out aggressive plans for future growth of Sony's key businesses, but he also pushed back a crucial profits goal.

"Much has changed over the past year and the pace of change has increased," said Stringer.

Much of the change was attributed to Sony's new management team, which was installed in April this year when the company underwent another reorganization. But unlike previous efforts the April shake-up reached throughout the company. Stringer installed himself as president and a handful of close confidants as the leaders of Sony's business divisions.

The reorganization also brought together software development and research and development into a single organization that worked company wide, consolidated manufacturing and procurement and created a common sales and marketing platform -- all areas that were duplicated under Sony's previous structure.

The plan appears to be paying off.

"In addition to fundamental changes in the organization structure, we are driving costs out of the company to right-size it for the competitive environment in which we operate," said Stringer. "We are exiting lines of businesses, closing and consolidating manufacturing processes and reducing head-count. All of which will make our company stronger."

In the first six months of the financial year Sony achieved 80 percent of the ¥330 billion (US$3.7 billion) savings it targeted for the full year. In the last year it has shed 19,500 workers from its payroll, and reduced inventories of components and unsold products by 40 percent to ¥800 billion.

Decisions are being made faster and, for the first time in Sony's history, component purchasing for Sony, PlayStation and Sony Ericsson has been consolidated, said Stringer.

But the company isn't out of the woods yet.

A 5 percent operating profit margin -- a goal first set by Stringer when he joined Sony in 2005 -- is still out of the company's reach and has now been pushed back to 2013. Reaching the goal or even coming close is needed before Sony can convince investors that it's managed to turn around its fortunes. Sony lost money last year and expects to do the same this year.

Sony is still losing money in key areas, most notably the PlayStation and Bravia TV businesses, but it set targets Thursday for both to return to profit in the next financial year, which runs from April 2010 through March 2011.

Stringer also set some aggressive goals for its TV business: a 20 percent global market share by unit volume in the fiscal year that begins in April 2012. Sony will also launch a new online service to provide video, music, games and applications to many of its consumer electronics products in the hopes of annual revenues of ¥300 billion in 2012 and it also wants a 40 percent share of the e-book reader market by the same time.

Some of the targets are old ones -- profits in the LCD television business have eluded Sony for a long time -- but many are new and point to a more confident Sony than in recent years.

One of the biggest initiatives will be a new online platform that is intended to feed a diverse range of content to Sony products. The Sony Online Service, as it has provisionally been dubbed, will dovetail with Sony's push to add network capability to most of its digital consumer electronics.

Over the envisaged service users will be able to download video, audio, e-books and other content, get new applications and software for their devices and access a range of services. It will be built on top of the PlayStation Network, a similar content distribution platform for the PlayStation games devices, but it will reach a much broader range of products.

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Martyn Williams

IDG News Service
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