Idei san : Technological visionaries are screwing Sony...

[DeadmeatGA]

Profit margin object of Sony reforms, chairman says
The Asahi Shimbun
--------------------------------------------------------------------------------

Sony Corp. hopes to patch up its profit margin with its latest restructuring program aimed at enabling the company to better compete with global industry leaders, Chairman Nobuyuki Idei says.

``What I am most concerned about is that our company will get accustomed to its current low profitability,'' he said in a recent interview with The Asahi Shimbun.

The primary target of the turnaround program announced last week is to improve the operating profit margin of its nonfinancial businesses to 10 percent or more in fiscal 2006, up from about 2 percent in fiscal 2002.

``Unless we make a 10-percent profit on revenue and reinvest it in capital outlays and research and development, we can hardly compete in the global marketplace with rivals like South Korea's Samsung Electronics Co.,'' Idei said.

Idei, a name once synonymous with the IT revolution, blamed Sony's scant profit margin in part on the advance in telecommunications technologies, such as broadband Internet connections and Web access through mobile phones.

``While we believed we were maintaining the initiative, the times have suddenly changed and overtaken our company,'' he said. ``Frankly, we've got to do something and quick.''

At the same time, Idei acknowledged that Sony executives and engineers have focused too much on technological prowess at the expense of the firm's traditional customer-oriented marketing strategy.

Sony is a market leader in digital cameras but remains a laggard in two other electronics products whose domestic sales are skyrocketing: flat-panel TVs and DVD players.

Sharp Corp. and Hitachi Ltd. are top suppliers of liquid crystal display TVs and plasma display panel TVs, respectively. The DVD recorder market is dominated by the trio of Matsushita Electric Industrial Co., Toshiba Corp. and Pioneer Corp.

Idei said Sony has been obsessed with new flat panels that, unlike LCDs and PDPs, illuminate on their own. He also said the company has banked on a next-generation optical disc, known as Blu-ray, at the expense of conventional DVDs.

``We dealt the cards the wrong way (in our marketing strategy),'' he said.

The restructuring program centers on cost reduction, with the company's 160,000 global work force to be slashed by 20,000, and a 1-trillion-yen investment to be made in capital outlays and R&D activities.

Idei said Sony must trim its bloated nonmanufacturing payroll, which was left virtually untouched during the company's earlier round of restructuring in 1999.

``We still have too many employees in administrative and other nonmanufacturing departments,'' he said. ``Sony has aged, as it were. We need to get into shape once again.''

Idei admitted that Sony should have initiated follow-up structural reforms in 2001 or 2002. ``But it is never too late for businesses (to mend),'' he added.

Idei said the three-year turnaround program, if successfully implemented, will open a new chapter for Sony, long the nation's premier brand.

``The year 2006 will mark a fresh start for Sony, which celebrates the 60th anniversary of its founding,'' he said.

In April 2006, the electronics and entertainment giant is planning to adopt a new framework, under which a group holding company oversees three subsidiaries, one in charge of electronics hardware, another entertainment content, and the other financial services.

Idei said reinforced headquarters functions will be essential for mapping out overall corporate strategies, with the holding company responsible for branding and long-term investments.

Idei, often described as a U.S.-style management guru, sounded like a typical Japanese executive when asked about his responsibility for massive personnel cuts and faltering earnings.

``Managers have greater responsibility for re-establishing a profitable business model, although I don't mean that everything is fine if the company can make money by shedding workers,'' he said.

``Once managers acknowledge their mistakes, they must plan and make new moves with grace.''(IHT/Asahi: November 6,2003) (11/06)

Idei san is blaming broadband network and executives too much focused on technological prowess as the cause of Sony's trouble.

Has the internal power-struggle between Idei and Kutaragi begun??? Who wil oust whom?

 

[London Geezer]

*sprinkles ice cold water all over his face*

MAKE HIM STOOOOOOOOP!!!!!!! j/k...

 

[London Geezer]

right, serious reply now:

Idei san is blaming broadband network and executives too much focused on technological prowess as the cause of Sony's trouble.

Ok so now your focus is on "criticising Sony's Marketing" which apparently has been put aside to achieve higher levels of technological advancement.

But at the same time, you also criticise them for "not knowing what they're doing and Hyping (MARKETING) their products too much" regarding the advances in technology, PS2 and especially Cell...

I mean, this is really a case of They-just-can't-get-it-right-itis for you isn't it. (sorry to sound very buffy-ey but i couldn't explain it better)

 

[notAFanB]

it's an good report of the concerns from Sony insiders. I am concerned about your selective quoting however.

``We dealt the cards the wrong way (in our marketing strategy),'' he said.

at least don't skew the context as above, it's disturbing.

EDIT: srew? er I meant skew *corrected*

 

[ChryZ]

I hate it, when people not include the link to the source of their quotes

 

[DeadmeatGA]

..

What Idei san is saying is that Sony is a traditional consumer electronic company that should focus on products like flat-panel TV and DVD players, instead of stuffs like "broadband network" and "technological marvels" that don't generate profit.

Why has Sony fallen behind its rivals on flat-panel TV? Because "certain project" has drained all the R&D budget and top talent resources within Sony group, not leaving enough resources to go to stuffs like flat-panel TV.

 

[Panajev2001a]

You are right they should focus their technology on things that can make profit and have made profits in the past like Playstation related products: PlayStation 3 and PSP.

They are also dropping internal manufactuing of mature products like CRT TVs: closing all their Japanese fabs and leaving only 7 open in total worlwide ( for CRT TVs ) by 2006.

Transformatio 60 did not seem to oust Ken Kutaragi as he is the man in charge of SSNC ( he is thus in charge of the whole Semiconductor business of Sony corp. ) and he is still chief of the Game Business Group, high executive at Sony corp. and more.

 

[London Geezer]

Re: ..

What Idei san is saying is that Sony is a traditional consumer electronic company that should focus on products like flat-panel TV and DVD players, instead of stuffs like "broadband network" and "technological marvels" that don't generate profit.

Why has Sony fallen behind its rivals on flat-panel TV? Because "certain project" has drained all the R&D budget and top talent resources within Sony group, not leaving enough resources to go to stuffs like flat-panel TV.

and that affects you because......

if Sony or some other HUGE electronic company doesnt push technology forward, who is gonna do it? there aint that many companies capable of "technological marvels" on this planet, so why do you feel Sony in particular should pay for their sins or something...
So, they shifted their focus from flat-panel TVs to "other things"... how is that a bad thing? why does it affect you so much on a personal note?
MS could shift their focus from crappy-os-development to "technological marvels". I and everyone else should praise them (or whoever in their place) for taking such risk!!
jesus you sound like a medieval old skeptical scientist condemning Galileo for saying the Earth is not flat or Kopernik for saying this planet revolves around the Sun instead of the other way around...

 

[notAFanB]

What Idei san is saying is that Sony is a traditional consumer electronic company that should focus on products like flat-panel TV and DVD players, instead of stuffs like "broadband network" and "technological marvels" that don't generate profit.

yes that is one of the issues he brings up in your article

and you conclusion is also fair, althoug I think you are putting a little to much emphasis on 'the project' .

however my object was merely that your selective quoting:

a. missed reams of his opinion on restructioning and shifting the focus to be more consumer oriented. (not too much of a problem since you posted most of the article)

b. skewed the quotes in a manner which wigs me out.

 

[Vince]

Re: ..

What Idei san is saying is that Sony is a traditional consumer electronic company that should focus on products like flat-panel TV and DVD players, instead of stuffs like "broadband network" and "technological marvels" that don't generate profit.

What? Read your own damn article (HINT: From the stuff not bolded). Lets go threw this, alrighty?

Idei, a name once synonymous with the IT revolution, blamed Sony's scant profit margin in part on the advance in telecommunications technologies, such as broadband Internet connections and Web access through mobile phones.

``While we believed we were maintaining the initiative, the times have suddenly changed and overtaken our company,'' he said. ``Frankly, we've got to do something and quick.''

Ummn. Yes, Sony was slow in entering the cell phone crazy before the joint-venture. Yes, they were basically non-existant in the internet boom of the late 90s. They're making up for it now.

How you twisted this threw selective quoting and your f-ed up thinking amazes me. You could be a case study.

Idei said Sony must trim its bloated nonmanufacturing payroll, which was left virtually untouched during the company's earlier round of restructuring in 1999.

``We still have too many employees in administrative and other nonmanufacturing departments,'' he said. ``Sony has aged, as it were. We need to get into shape once again

Too many "Administrative jobs...." <thinks intensly for 3 minutes> OMG! Idei to fire KK!!! Hoo hooo.

Idei said the three-year turnaround program, if successfully implemented, will open a new chapter for Sony, long the nation's premier brand.

``The year 2006 will mark a fresh start for Sony, which celebrates the 60th anniversary of its founding,'' he said.

Wait. Hold the presses.... Didn't that Tranformation60 conference list Cell as a key component of the turn-around? Why... I think so!

Why has Sony fallen behind its rivals on flat-panel TV? Because "certain project" has drained all the R&D budget and top talent resources within Sony group, not leaving enough resources to go to stuffs like flat-panel TV.

Most likely because they become complacent with their CRT/Trinitron sales and didn't anticipate the LCD/Plasma market to expand as rapidly as it did - which is something many people thought.

Has the internal power-struggle between Idei and Kutaragi begun??? Who wil oust whom?

Yes, they're both fighting over who gets to fly to America and shut you up

 

[DeadmeatGA]

...

So, they shifted their focus from flat-panel TVs to "other things"... how is that a bad thing?

The flat-panel TV is sold for a profit. The other thing is going to be sold at a loss.

Let us suppose that Sony invests $3 billion into flat-panel TV project. What happens? Sony gets to sell lots of advanced flat-panel TV sets that carry a fat profit margin. But Sony is investing $3 billion elsewhere, and how much do they sell for? $399 and $199 est. How much profit do they carry? Nothing, they are sold at a loss. It doesn't make any sense to invest your money on stuffs sold at a loss than on stuffs that actually served as the bread and butter of company for the past 60 years, but this is actually happening at Sony group right now. Why? Because certain technologically oriented executive find the money-loser project more interesting, and this is the root of Sony's problem.

Sony can survive without PlayStation, but it cannot survive without TV sets and Home theater products. Let the investment be directed to businesses that actually generate profit.

 

[DeadmeatGA]

..

OMG! Teh Cell is killing Sony from within like a Cancer! hoohooo!!!

Are you not aware of the fact that cancer is indeed your own body cell mutated to kill you???

 

[London Geezer]

Sony are taking a risk, losing money, to "try" and progress technology.

How - is - that - a - bad - thing - Deadmeat?

Without getting into the speculation of whether they will make it or not.

 

[Vince]

Re: ..

Let us suppose that Sony invests $3 billion into flat-panel TV project. What happens? Sony gets to sell lots of advanced flat-panel TV sets that carry a fat profit margin. But Sony is investing $3 billion elsewhere, and how much do they sell for? $399 and $199 est. How much profit do they carry? Nothing, they are sold at a loss. It doesn't make any sense to invest your money on stuffs sold at a loss than on stuffs that actually served as the bread and butter of company for the past 60 years, but this is actually happening at Sony group right now. Why? Because certain technologically oriented executive find the money-loser project more interesting, and this is the root of Sony's problem.

Ohh, this is charming. So, let me get this strait... Cell and "Broadband Networks" are the reason Sony didn't jump on the LCD bandwagon back in ~2000 by investing in infastructure due to their complacency with CRT/Trinitron.

Yet, dispite the "massive" investment in those "other" things you dispise, they still manged to do do this with Samsumg. Which just broke-ground recently.

They must have had a bake-sale to raise the funds Kenny stole from the Cookie jar.

Sony can survive without PlayStation, but it cannot survive without TV sets and Home theater products. Let the investment be directed to businesses that actually generate profit

Why do I think that if they spun off SCE - it would do hellishly good?

Are you not aware of the fact that cancer is indeed your own body cell mutated to kill you???

Are you serious? <Keanu style> "Whoa..." I wish I would have payed attention during some of those two decades spent in higher education for a research related medical field. You moron.

So, when are you going to cut the shit and just stop with this constant Sony bashing.

 

[maskrider]

Re: ..

Are you not aware of the fact that cancer is indeed your own body cell mutated to kill you???

Are you serious? <Keanu style> "Whoa..." I wish I would have payed attention during some of those two decades spent in higher education for a research related medical field. You moron.

So, when are you going to cut the shit and just stop with this constant Sony bashing.

Vince has just said the same thing that I wanted to say.

Please kindly cut the bulls, please !

You are not trying to educate us in management, economics and marketing, right ?

From what I know this is a rather technical and at least console related board, was that changed recently ? So many these and those Sony not doing right these days. Are we in some Sony discussion board ?

 

[gurgi]

Are we in some Sony discussion board ?

To be fair to Deadmeat, there are far more threads about Sony than his few Sony critisizm threads. This is a console board, and Sony makes videogame consoles. And while I'm not sure what his agenda is, I've seen him raise some valid points. Points he reinforces with Sony's own words no less.

The largest console manufacturer by far is barely scraping by and the 2nd/3rd largest (depending on who you talk to about userbase) is losing money. It just doesn't seem very healthy to me, from a consumer dollar pov. Is this a healthy market?

 

[maskrider]

Are we in some Sony discussion board ?

To be fair to Deadmeat, there are far more threads about Sony than his few Sony critisizm threads. This is a console board, and Sony makes videogame consoles. And while I'm not sure what his agenda is, I've seen him raise some valid points. Points he reinforces with Sony's own words no less.

The largest console manufacturer by far is barely scraping by and the 2nd/3rd largest (depending on who you talk to about userbase) is losing money. It just doesn't seem very healthy to me, from a consumer dollar pov. Is this a healthy market?

If you talk about fairness, by simply looking at the thread he posted, I think it is fair to say that he has a focus, and indeed very focused, that's all only about Sony, especially the things that he thinks are not good about Sony.

Is that a worthy market ? If not, why the people are cutting throat to enter the market ? Healthy or not depends on how the company does things, I will say MS is not very healthy starting from the beginning. But many people think that MS has the money to spend and MS can pour as much as they want (but I certainly disagree MS can do that freely), so, is that called healthy ?

 

[gurgi]

is that called healthy ?

I'm no expert, but I would say no. I'm of the opinion consumer dollars should drive a market, not profits from another market. That means money Sony may get for console R&D from other markets (does this happen?) as well as billions of MS operating system dollars.

 

[nondescript]

Ahh...what would I do without DGMA's daily report on "Searching the web for bad news about Sony"

I think what Idei is saying is Sony needs to get out of low-margin industries and find a new balance between consumer marketing and technology R&D.

I dunno about flat-TVs and DVD recorders -- these are rapidly becoming low-margin commodity items, with the Korean and Taiwanese manufacturers getting in. AU Optronics' 6th generation fab is coming online, and Samsung's 7th generation fab is being built as we speak -- I expect LCD production to increase dramatically in the next two years. (Not to mention the absolute army of Chinese manufacturers a few years behind them.) There may be a more years of higher-margins left in DVD recorders, but its just a matter of time.

Sony definitely missed the boat on wireless and broadband communication - but they were late to the party in laptops and PDA's too, yet they have significant market shares now. I think that after a few years, Sony will establish itself in the high-end.

 

[MfA]

All products get commodotized in the end ... a company as big as Sony needs to be in high volume low margin markets too though. There is only so much money to be made in niche markets and markets where you can get software vendor lockin.