Everyone knows how badly Sony has lost its footing. In the way Yahoo was once synonymous with the Internet and Kodak with photography, Sony was once synonymous with consumer gadgetry. But by the time Apple’s iPod arrived on the scene, things had started to turn bad at the Japanese giant.
Still, the depth of Sony’s (SNE) woes are hard to stomach. The company’s revenue, which hit $97.7 billion at the end of its 2009 fiscal year, dropped over the next few years to just $82.8 billion at the end of its 2012 fiscal year. In addition, Sony’s net losses deepened, quadrupling from $1.3 billion in 2009 to a staggering $5.8 billion in 2012. During Sony’s fiscal first quarter ended June 30, the company announced similarly disconcerting performance. Its gaming division, which includes its vastly important PlayStation brand, saw sales drop 14.5% year-over-year. Sales in its home entertainment division were down 26.2%. Even Sony’s Devices operation was down 14.4%.
The bright spots? Sony’s imaging division saw sales go up 7.6% during the quarter, and its movie operation saw revenue rise 6.2%. Still, the former could only muster $160 million in operating income — a pittance for such a large company — and the later lost $62 million in operating income. Revenue jumped 133% to $3.6 billion at the company’s mobile unit division. However, the division’s operating income dropped from a slight gain last year to a $356 million loss this year. A very mixed picture, in other words.
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Sony’s troubles become even more apparent when evaluating its current standing in key markets. According to research firm Gartner, Sony held just 1.9% of the worldwide mobile phone market in the first quarter, far behind Samsung’s 20.7% lead. In the LCD television market, Sony’s shipments dropped from 4.2 million units in the first quarter of 2011 to 3.6 million this year, giving it just 8% ownership, according to research firm iSuppli. Samsung, the television market’s leader, owned 19% of the space.
Even in gaming, where Sony is perhaps doing the best job of staying relevant, its PlayStation 3 continues to have trouble catching Microsoft’s (MSFT) Xbox 360 in unit sales. Meanwhile, Sony’s PlayStation Vita handheld has been heralded for it sophisticated technology but must compete with Nintendo’s (NTDOY) handhelds. Consumers have also flocked to Apple (AAPL) and Google’s (GOOG) mobile phones to play games.
Sony’s new CEO Kazuo Hirai was surprisingly candid about his company’s troubles back in February, telling the Wall Street Journal in an interview that trying to fix the electronics giant won’t be easy. “I thought turning around the PlayStation business was going to be the toughest challenge of my career, but I guess not,” Hirai told the Journal. “It’s one issue after another. I feel like ‘Holy s—, now what?’”
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After becoming CEO earlier this year, Hirai made the tough decision to cut 10,000 employees from Sony’s workforce. He also announced a new “One Sony” initiative designed to focus the company’s efforts around three core “pillars:” mobile, digital imaging, and gaming. Hirai even shuffled his executive staff to include individuals he ostensibly believes that can more effectively carry out his strategy.
But the big question is whether Hirai can fix the Sony brand. The attention garnered by the likes of Apple, Google and Samsung is relegating Sony to the back bench. To a certain extent, Sony’s executives have had to labor in the shadow of Apple’s phenomenal and unparalleled turnaround. Although Hirai is celebrated for building the PlayStation brand, Sony comes with many more moving parts. And trying to make them work together to regain the company’s long-lost verve will definitely prove his most challenging job yet.
