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Tuesday, May 22, 2012
Once one and only, Sony seeks to regain that status
By JUN HONGO
Despite reporting a record ¥457 billion annual loss last year, Sony Corp. earlier this month said it would return to the black in fiscal 2012 with a ¥30 billion profit.
The Great East Japan Earthquake, Thai floods and strong yen have all been recent factors that hurt the struggling electronics giant — but does Sony finally see the light at the end of the tunnel?
Here are some questions and answers about the corporate icon and its history:
How did Sony get its start?
Masaru Ibuka and Akio Morita started Tokyo Tsushin Kogyo in May 1946 with capital of ¥190,000. The company was originally set up to research and manufacture measuring equipment and communications appliances. It was renamed Sony in 1958. The name derives from "sonus" (Latin for sound) and sonny — English slang for a young boy.
Ibuka was 38 and Morita 25 when they started business. Morita's family had become a successful sake brewer in Aichi Prefecture and gave Sony financial support in its early years.
What were Sony's top products?
By 1955, Sony was producing Japan's first transistor radios. But the true game-changer that defined Sony's innovative corporate image was the Walkman, a portable cassette player that debuted in 1979.
According to Sony's website, Ibuka was a fan of classical music and often brought a music player with him on business trips. But the device, which came with a shoulder strap, weighed 1.7 kg and was not very portable. Ibuka asked his team to create something handier for travel.
Morita's children were meanwhile in the habit of going straight to their stereos as soon as they got home from school. He believed creating a portable music player would change the way the generation interacted with music.
Sony unveiled the Walkman in July 1979 for ¥33,000. The high-end models of Apple Inc.'s iPod Touch sell for similar prices today. But in 1979, new college graduates were earning an average of ¥109,000 per month. Only about 3,000 Walkmans were sold in the first month.
Sony then sent out employees equipped with Walkmans to ride trains on the Yamanote Line for a day to give the product some exposure. The rest was history.
By the time Sony pulled the plug on cassette-tape Walkmans in 2010, 220 million of them had been sold worldwide during the 31-year run.
Less successful was the Betamax video cassette recorder, a home-use product Sony developed in 1975. Although in many ways deemed technically superior and more compact, it lost the VCR format war to the VHS camp.
In October 1982, Sony released the world's first home-use compact disc player with Phillips. In 1994, it expanded into video games and came up with the PlayStation console, selling 100 million units worldwide in 10 years and turning it into a core business. It also made TVs.
What was the secret to Sony's innovation?
Morita had said "the two important things are wisdom and speed" — Sony made decisions quickly and was willing to take on challenges.
The book "Tensai Kisai Ga Tobidasu Sony-no Fushigina Kenkyujo" ("Sony's Extraordinary Research Center Where Geniuses and Extraordinary Men Fly Out"), written by Sony Computer Science Laboratory chief Mario Tokoro and author Shinko Yuri, offers insights.
According to the authors, Sony, seeking to strengthen its computer business, approached Tokoro in July 1987 while he was teaching at Keio University.
The company asked him to lead their new computer science lab so the firm could quickly catch up with its competitors.
Tokoro was at first reluctant to take the offer, but provided a 10-page wish list to Sony on how the new lab should operate. By October all his requests were granted and in Feburary 1988, merely seven months after the first contact, SCSL was set up.
"At the time, I was working on research with companies leading the information technology business, including Fujitsu Ltd., NEC Corp. and Toshiba Corp. — but no company could make quick decisions at that level," Tokoro wrote in the book.
Researchers who worked at SCSL later invented key technologies for some of Sony's products, including the Aibo robot pet and the PlayStation 3.
Who has led Sony?
Morita is the first name up. The visionary was selected in 1998 as one of Time magazine's list of 20 most influential businesspeople of the 20th century. He was the only non-American on the list, which also included Walt Disney, Bill Gates and Henry Ford.
Morita was vocal about his political beliefs. In 1989 the business guru teamed up with current Tokyo Gov. Shintaro Ishihara to write "The Japan That Can Say No," where he claimed the country should become more than a "yes man" to the United States. The book became a best-seller in Japan.
Meanwhile, Ibuka, who cofounded Sony with Morita, had taken a keen interest in children's education. He authored "Yochien Dewa Ososugiru" ("Kindergarten is Too Late") in 1971, underscoring the importance of child-rearing and education in the formative years.
Ibuka served as the president of Boy Scouts Nippon as well.
He was known for his eccentric side and played a key role in setting up the Sony ESPER laboratory, which focused on research of biological, mental, spiritual and other psychic powers.
How did the Sony group expand and how big did it get?
Over the years, Sony expanded into six major fields — electronics, games, music, movies, financial services (such as life insurance and banking) and pursuits linked to the Internet.
The expansion was rapid. Firms that Sony bought included Columbia Pictures Entertainment Inc. and music giant Bertelsmann AG. By 2000, Sony's market cap had surpassed ¥10 trillion, but it is only worth about 10 percent of that today.
What were some of the downsides in Sony's history?
In 2006 the firm started generating negative headlines after a Sony battery in someone's laptop computer began spewing smoke and sparks at Los Angeles International Airport. That led Sony to conduct a worldwide recall of some 3.5 million battery packs used buy six computer makers, including Toshiba, Fujitsu and Hitachi Ltd.
Sony was also hit hard in 2011 when someone hacked the PlayStation network and leaked the credit card information of 77 million customers online. The fallout prompted a U.S. House of Representatives panel to request that Sony explain why the hacking went unnoticed.
Then there was the 2003 "Sony shock." That April, Sony announced an operating profit of ¥185 billion, which was about ¥100 billion short of what it had predicted previously. That sent Sony's and other electronics manufacturers' shares plunging.
Why did Sony stumble?
Some say a lack of strong leadership was the cause of an arrogant juggernaut's downfall. Following the Sony shock, Businessweek magazine called then Sony chief Nobuyuki Idei one of the worst CEOs of the year.
"After announcing a bold restructuring program in 1999, he failed to move far enough or fast enough. Profit margins on electronics products have plunged to around 1 percent, down from 10 percent a decade ago," the magazine wrote. Morita had died the same year, of pneumonia.
Idei is known to have shifted Sony's priorities from electronics manufacturing to creation and production of content, a move that didn't pan out.
The magazine Nikkei Business in December 2005 also named Idei the year's worst entrepreneur.
Some say Sony's restructuring in the early 2000s also backfired and resulted in the loss of top engineers amid workforce cuts that reached into the thousands. Worldwide, Sony employed 182,000 in 2001, but its ranks had fallen to 158,500 by March 2006. While recent moves have pared its workforce to 168,200 today, the company has said it will cut about 10,000 more within the year.
Sony claims its restructuring program was intended to shift personnel from unprofitable projects to core businesses, but trends show the plan didn't work. Samsung Electronics Co. has taken a wide lead over Sony in the global flat-TV market share, while Apple's iPod replaced the Walkman as the top portable music player.
In a 2004 interview with Website Nikkeibp, former Sony President Kunitake Ando pointed out that his company "used to be filled with eccentric and odd employees," but has lost the edge after transforming into a place with elite workers with high educations.
"There are many employees who take advantage of the Sony brand and swagger around despite having made no contribution," he said.
What will it take for Sony to regain its momentum?
During a speech at the Foreign Correspondents' Club of Japan last month, Barclays Capital analyst Yuji Fujimori said it is crucial that Sony come up with a game-changing product, but that "will not happen unless the company sorts out its business process."
"It appears to me that the years Sony decided to (get) rid (of) its audiovisual technologies research to slim down corporate spending is when the decline began," he said.
Whether Sony has gotten the message remains to be seen.
Earlier this month, Sony Chief Financial Officer Masaru Kato said the company will focus on reconstructing its electronics business in coming years. Gaming consoles, mobile phones and digital imaging such as cameras will be core projects, he said.
Afterward, media reports said Sony and Panasonic Corp. are considering working together on TVs, an area in which both have struggled for various reasons, particularly the rise of Samsung and other foreign rivals.
The Weekly FYI appears Tuesdays. Readers are encouraged to send ideas, questions and opinions to email@example.com