Sony’s apocalyptic fall from grace over the last 5 years has been startling. In the late 90’s and early naughties the Japanese tech giant couldn’t make a wrong move. It went from success story to success story – but more recently they have begun to fall behind their rivals time and time again.
In the 90s they pretty much owned the monopoly on portable music players: the walkman. With some foresight they could have, and probably should have, beaten Apple to the Mp3-punch. But a company with little or no knowledge of portable music players managed to take that crown from them. A massive misstep in hindsight. They then moved into games and with the PS1 and PS2 which was massively successful for the tech giant. But, once again, a competitor (Microsoft & their Xbox) came into the market place and gave them a bloody noise.
Now their only real jewel in their crown is the PS3, but Sony has never really recovered from the colossal price of developing the Cell Chip for the PS3 and this decision seems to be dragging them down even further. The PS3 just isn’t turning a profit in the way the Japanese firm would want, and with the rest of the company hardly setting the world alight – where does this leave Sony? Well, yesterday the Japanese electronics firm reported a record annual loss – as natural disasters, a strong yen and, ultiamately, a lack of innovation has seen them fall on hard times.
Overall, the firm reported a net loss of 456.7bn yen (£3.5bn) for the year to end of March compared to a 259,6bn yen loss last year. The company attributed the losses to a perfect storm of factors; including low demand from developed markets; the earthquake and tsunami in Japan in March last year and a strong yen.
Playstation 3 sales saw a slight dip from last year’s results. They sold 13.9 million units during the last 12 months compared to 14.3 million during the same time last year. That makes the total worldwide sales of 63.9 million and was the second best year for the console’s sales. But their market share has been cut with Xbox sales of 67.2 million and Wii sales of 96 million.
More encouraging news came from the software side of the business – sales rose from 147.9 million last year to 156.6 million this year. Surprisingly Sony still sell a fair few million PS2’s, but sales did fall from 6.4 million to 4.1 million and PSP sales tumbled from 8 million to just 6.8 million.
One piece of the financial-jigsaw missing from yesterday’s announcement was sales information for the newly launched PS Vita – despite launching last year in Japan. Weekly sales from Japan don’t make for great reading as last week’s sales came in at a rather disappointing 10,583 units.
Apart from external factors, analysts reckon Sony’s demise is more simple: they’re losing ground to its competitors in key areas including tablets, computers, phones and especially TV’s. Sony’s TV division has been losing money for 8 years and competition from Samsung has seen the Bravia brand fall on hard times too.
So what does Sony have planned to turn around its fortunes. Well, not a lot apart from cuts and austerity. CEO Kazou Hirai, who officially took his new post on Wednesday, is planning a major restructuring of the company. He wants to implement a new vision for the company where they will focus on core electronics that built its legacy and on online platforms that links its various products ranges. Essentially more joined up thinking. Hirai outlined his vision and plans for Sony in a Tokyo press conference last month, a plan that includes a reduction of global head count by 10,000, or about 6 percent of the total workforce. But will this save the ailing company?
Sony said on Thursday that for the current fiscal year through to March 2013 it aims for a net profit of ¥30 billion, while increasing sales 14 percent from the latest result. It said it would look to turn around its struggling TV business with a focus on profits over unit sales, and expected a strong recovery from last year’s earthquakes and Thai floods.
Although the long term prospects for Sony remain in question – its showing at E3 next month will be a critical one – in general this isn’t particularly bad news for Sony. The losses were less than expected (£4 billion in the red was the previous estimate) and the minor drop in PlayStation 3 sales has also been mirrored by the Xbox 360 recently. With new boss Kaz Hirai (previously the head of Sony’s American PlayStation division) at the reins Sony is even predicting a sharp swing back into profit next year, of $376.5 million. We’ll believe it when we see it.