Sony’s cost-cutting and changes in product strategy over the last few years are paying off. It terminated 20,000 employees and closed about 18% of its manufacturing plants during the cutbacks.
For its fiscal third quarter, profits were up and Sony cut its projected annual loss. It also said it’s optimistic that the company’s electronics (mostly TV sets) and video games operations will become profitable. The two operations produce about two-thirds of the company’s revenue.
CFO Nobuyuki Oneda said the company thinks it’s bottomed out and will do "fairly" well in the future.
Items of note are:
- Revenue declined almost 11% in its electronics operations, but its operating profit increased.
- In TV sets, which have been a perennial money loser as its market share declined, the company said it can make upward of 20 million LCD sets at a profit next year. The profitability has been reduced, however, by a joint manufacturing deal it has had with Samsung. Competitors like Samsung and LG sell sets that are comparable to Sony’s at consumer-noticeable lower prices; this holds back market-share growth.
- Despite stiff competition from Amazon.com’s Kindle, Apple’s new iPad and others in the pipeline, Sony is optimistic it can sell more than 1 million of its eBooks in the current fiscal year and two to three times that in the coming years.
- In network products and services business, which now includes the PlayStation products, it increased sales 1% and got the operation into the black. However, it cut its forecast for PlayStation Portable (PSP) unit sales by 17%.
- It expects to reduce the PlayStation 3’s (PS3) manufacturing costs 15% by March 31, 2011. That’ll help it make a profit on each unit rather than lose money.
- Worldwide sales of PS3 increased 44% in the fiscal third quarter. Sony reduced the price on some models last year.
Sony Bets on 3D
Sony has upped the ante that 3D will be successful both in the theaters — where it already is — and at home. It’s ramping up a line of 3D sets and supporting 3D movies. If 3D succeeds in the home, it’ll also help Sony and others sell more Blu-ray players because traditional DVD players can’t handle 3D video.
CEO Howard Stringer has said the company expects 3D products — cameras, theater projectors and TV sets — will produce revenue of more than $11 billion in annual sales by 2013. It reportedly already has orders for more than 10,000 3D projectors from US theaters.
However, one "Avatar" doesn’t make for an inexorable trend in the consumer market. It was popular in theaters where it’s easier for viewers to use 3D glasses than at home.
The company seems certain 3D will succeed in action films and perhaps live sports like the World Cup and Super Bowl. It’s not certain that those are sufficient to motivate consumers to buy a pricey 3D TV set, especially when they’re still in the stages of upgrading to HD TV sets.
Sony also continues to trail in growth markets such as portable media players, online music and video services, e-book readers and netbooks. |
