Friday, September 23, 2005

Sony's Restructuring Plan Brings Praise, Skepticism

The Los Angeles Times covers the recent restructuring plan from Sony that garnered some praise as well as skepticism from the analyst crowd. On the restructuring itself, Richard Doherty at Envisioneering Group said, "We all went through this more than a year ago. There isn't a radical difference between what was said today and what was said last year under a different chairman and CEO."

Coooperation between the various divisions was also an issue. Sony CEO Sir Howard Stringer pointed out that the PSP was a prime example of cross-company cooperation since the device plays games, video and music. Mike McGuire at Gartner commented that "Creating a seamless link between the device and the service is crucial. That's what Apple has done, and that's what Sony wants to do with the PSP. Consumers are nothing if not foragers of digital content. With the PSP, you can connect to the Internet, browse and download content other than games."

Making that work is another story. Mark Stahlman at Caris & Co said, "Previous management understood what needed to be changed, but they were unable to make it happen. To actually make these changes is a massive challenge. It can't be done quickly. There will be people who will resist. There's no avoiding a good deal of internal conflict."

Analysts praised the company's focus on the Playstation division. P.J. McNealy at American Technology Research remarked, "Given the fact that PS3 means much more than just video gaming, it's going to be important to all their media studios. This comes at a time when all internal content — whether or not it's music, movies or games — will be important to the PS3. It's the promise of the vertical, which Sony has had for many years but has never really delivered on."

Stringer also targeted the company's television business, which saw sales drop 21% in the quarter ended June 30 as low-cost competitors grabbed market share in the fast-growing flat-panel business. The poor showing contributed to a $330-million loss in the company's electronics unit that quarter.

Another focus area is the company's TV set business. Some analysts are taking a wait-and-see approach. Mitsuhiro Osawa at Mizuho Investors Securities in Tokyo said, "Basically, the direction they laid out is good. "This Christmas will be the first big test, with products like televisions and the new Walkman. We'll see in January if they've cleared the first hurdle."