Less than a fortnight into his job as CEO, Kazuo Hirai on Thursday sketched out a revival strategy for Sony Corp built around mobile electronics - phones, games and cameras - and a medical business with annual sales of $1.2 billion.
Hirai, who took over from Howard Stringer this month, has doubled Sony's annual loss forecast to a record $6.4 billion, and is under intense pressure to fix an ailing TV business and turn around a brand that has been trampled by Apple Inc and South Korea's Samsung Electronics.
“We have heard a multitude of investor voices calling for change,” Hirai told a packed news conference at Sony's Tokyo headquarters, close to the company's first factory established 65 years ago. “Sony will change.”
“Sony has always been an entrepreneurial company. That spirit has not changed,” he said.
Sony, and other leading Japanese TV makers Sharp Corp and Panasonic Corp have been battered by weak demand, fierce competition and a stronger yen that makes exports less competitive.
The three companies expect a combined loss for the year just ended of $21 billion - more than Sony's entire market value, which has slumped by close to a fifth in the past month. Samsung is 10 times more valuable, while Apple, which Sony executives considered buying in the early 1990s, is worth 30 Sony's.
“It doesn't feel like an aggressive makeover,” said Tetsuro Ii, president of Commons Asset Management, who oversees some $33 million worth of assets and does not hold Sony stock.
“You can't really see the roadmap for how they're going to revive the electronics business, nor how they're going to create new value.”
Sony confirmed earlier media reports that it will cut around 10,000 jobs - 6 percent of its global workforce - and take a 75 billion yen ($926 million) restructuring charge in the current business year to next March. It also plans to cut fixed costs in the TV business by 60 percent in 2013/14 from last year's levels, and trim 30 percent off the business' operating costs.
“We cannot shy away from difficult decisions,” Hirai said.
Eyeing new business opportunities in the fast-growing medical business, Sony said it was targeting annual sales of 50 billion yen in 2014/15, eventually doubling that, and was scouting for acquisitions and other strategic investments.
Sony is one of several potential partners that have been linked with disgraced medical equipment maker Olympus Corp , which has a 70 percent share of the global market for diagnostic endoscopes and is looking to shore up its finances after a $1.7 billion accounting fraud.
Sony has held up endoscopes, enhanced by its own graphics technology, as an example of new areas it is looking to for growth.
Hirai is looking for total group sales of 8.5 trillion yen ($105 billion) in 2014/15, with an operating margin of more than 5 percent.
In February, Hirai said he would widen the PlayStation gaming console online network to integrate all Sony devices, replacing three online content delivery platforms it currently operates.
Sony recently bought out Ericsson's half of their smartphone venture for $1.5 billion to shore up its position in a market where Apple and Samsung have become leaders. It has since launched its first smartphones, the Xperia series, under the Sony brand.
“Smartphones will become the hub device,” Hirai said on Thursday, vowing to make Sony a leading player in mobile phones, tripling revenue to 1.8 trillion yen ($22.2 billion) over the next three business years.
Sony said it would also look for potential partners to make batteries for electric vehicles.
“Expanding in medical and electric vehicles is good because these businesses have better margins and they're areas that Japan is good at,” said Michael On, managing director at Beyond Asset Management.
The latest job cuts follow two rounds of layoffs Stringer made in his six-year tenure at Sony. Chief Financial Officer Masaru Kato noted earlier this week that around 5,000 workers would come off the Sony payroll with the sale of a chemicals business and a small liquid crystal display fabricator.
Hirai said some of the cuts would be in TV, but gave no further details on how he planned to achieve the cuts he outlined for the business.
Sony shares closed 0.9 percent higher at 1,528 yen on Thursday ahead of the briefing. The benchmark Nikkei average ended up 0.7 percent. - Reuters