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Thursday, May 22, 2014
Sony CEO Outlines Business Structure Plan
On Thursday May 22, 2014, Kazuo Hirai, President and CEO, Sony Corporation, presented the company's business direction towards the structural reform of its electronics business.
"FY14 is the year we will complete the structural reform of our electronics business, in order to transition Sony to a high profitability structure and deliver sustained growth, said Hirai.
These reforms will be completed before, and will not extend into the fiscal year ending March 31, 2016."
Hirai outlined key initiatives for Sony's three core electronics businesses - the game and network services, mobile and imaging businesses - and the entertainment and financial services businesses, as well as Sony's strategy for new technology development and measures for new business creation to deliver further growth from FY15.
Sony is proceeding with the withdrawal from its PC Business, the split out of its TV business and the structural reform of its sales companies and headquarters functions. The company expects to complete these initiatives within FY14.
Sony will withdraw from the PC business following the completion of sales of its Spring product lineup currently on sale in global markets. Sony has signed definitive agreements to transfer its PC business operated in Japan under the VAIO brand and certain related assets to VAIO Corporation, a newly established special purpose company to be funded by a subsidiary of Japan Industrial Partners, Inc. The target for completion is July 1, 2014. Going forward, Sony will provide customer support for PC products that have already been sold.
Sony plans to turn its struggling TV business into a separate entity - Sony Visual Products Inc - within a few months to boost transparency.
The company is targeting July 1, 2014 to start operation of a new TV business company. Sony will also execute fixed cost reduction measures across the sales companies, headquarters and indirect functions that support the TV business in order to help establish a business structure capable of minimizing the impact of external market fluctuations. Sony expects to return the TV business to profitability in FY14 by executing the above measures, accelerating the implementation of its strategic shift towards high value-added models, including 4K, and establishing more flexible operations capable of responding to fluctuations in demand or the business environment.
"We are not thinking about selling our TV operations or shutting them down or anything like that," Hirai said.
"We're doing business in the competitive environment of a market. I wouldn't rule out the possibility of an equity tie-up, but right now we are not doing business under the assumption that would happen."
Sony also aims to reduce total costs in its electronics sales companies by approximately 20% and costs across headquarters and support functions by approximately 30%, by FY15, compared to the fiscal year ended March 31, 2014.
The company expects to incur total costs of more than 300 billion yen during FY13 and FY14 in relation to the reform measures. The company considers that it is possible to target consolidated operating profit of around 400 billion yen in FY15 as a result of cost savings from the above reforms, alleviation of losses from the PC and other businesses, profit contribution from the core electronics businesses (game and network services, mobile and imaging), and stable profit generated by the entertainment and financial services businesses.
In the game and network services business, Sony aims to expand the installed base of PlayStation 4 and reinforce its network services in order to drive increased profit growth. As of April 6, 2014, PS4 had achieved cumulative sell-through of 7 million units, with Sony aiming to further consolidate its No.1 position in the home console market in FY14. Approximately half of PS4 users have registered for the PlayStation Plus subscription service, and the number of active users registered to PlayStation Network and Sony Entertainment Network already exceeds 52 million. In the U.S., Sony plans to start an open beta version of the PlayStation Now game streaming service this summer and introduce a new, cloud-based television service within the calendar year 2014.
In the mobile business, Sony plans to add to its flagship Xperia lineup in a timely manner and to enrich its entry-level product lineup to address specific local needs. In addition to Europe and Japan, Sony aims to build strategic partnerships with network operators in the U.S., and, by introducing models that fully match customer needs, strengthen its presence in the U.S. market.
In the image sensor business, Sony will continue to integrate its highly competitive image sensors with its wealth of camera expertise to drive the growth of its finished product and device businesses. Sony intends to bolster its manufacturing capacity for stacked CMOS image sensors. Additionally, the company aims to continue to deliver high value-added, professional and consumer imaging products in order to sustain business profitability.
In the component device space, Sony plans to focus on batteries in addition to image sensors. These two key components are expected to be a driving force for Sony to deliver products and new services. In the medical space, the development of surgical endoscopes incorporating 3D and 4K technology being carried out by Sony Olympus Medical Solutions, Sony's medical business joint venture with Olympus Corporation, is proceeding as scheduled, targeting market launch in FY15.
Sony believes its content assets position it for continued growth. In this environment, Sony will explore new ways to innovate in its Entertainment businesses, including collaboration with its network service businesses. In Pictures, Sony is executing a cost reduction plan that aims to achieve total cost reduction of 300 million dollars by the end of FY15. Sony expects to continue to produce quality programming in the television production business and achieve steady growth in its media networks business, both of which are focus areas for Sony. In the Music businesses, Sony is targeting increased market share by cultivating new talent and expanding its presence in emerging markets.