February 10, 2012 11:16 am

Hirai outlines vision for leaner Sony

Sony’s incoming chief executive has outlined his vision for a leaner, more tightly integrated electronics and entertainment company, as he prepares to lead the effort to restore it to profitability.

In an interview with the Financial Times following his appointment last week, Kazuo Hirai said he would accelerate a restructuring programme initiated by his predecessor, Sir Howard Stringer, that has seen Sony scale back unprofitable manufacturing businesses and focus more on software and content.

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“We need to do this quickly, with a sense of urgency and speed, and some of the decisions are not going to be popular,” Mr Hirai said.

A veteran of the Japanese group’s PlayStation video game business, Mr Hirai was named Sony’s next chief executive on February 1, and will take up the job in April. The day after the announcement, Sony warned it would suffer a Y220bn net loss this financial year, two and a half times its previous forecast.

It blamed the soaring value of the yen, supply-disrupting floods in Thailand late last year and the cost of restructuring its unprofitable television business – problems that have driven other Japanese electronics companies, such as Panasonic and Sharp, into the red as well.

Mr Hirai said much of the foundation for a turnround had been laid already, since he was put in charge of Sony’s consumer electronics operations last year. In televisions – the company’s most financially troubled business – Mr Hirai slashed sales and production targets and orchestrated the dissolution of a liquid crystal display-making joint venture with Samsung of South Korea.

Quitting the venture will force Sony to take a Y63bn accounting charge this year, but the company says it will save Y50bn a year in fees and penalties thereafter – money it was paying Samsung because falling TV sales meant it was buying fewer screens from the joint business that it had promised.

Sony’s share price has risen by 10 per cent since Mr Hirai spoke in similar terms at a news conference on February 2, promising to make “unavoidable, painful choices” to fix or withdraw from unprofitable areas. In the interview, Mr Hirai said he was working on “de-layering” Sony’s management to speed decision-making and product development.

Last August, he reorganised the electronics business’ chain of command to give more authority to “horizontal” management teams that cut across different divisions, part of an effort to make Sony’s gadgets work more smoothly together and with the company’s software, music, movies and other content.

These themes will be familiar to observers of the company: they have been staples of Sir Howard’s speeches and interviews since he became chief executive in 2005, yet many believe Sony has been too slow to act.

Sir Howard faced boardroom resistance and a string of external shocks, from the financial crisis in 2008 to Japan’s devastating earthquake and tsunami last year. Now, Mr Hirai said, the company is more united behind its new direction: “Both Howard and I as well as most people on the management team, if not everybody on the management team, understand that we need to move on,” he said.

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