Sony chief embraces ‘sledgehammer’ strategy

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Sony's future lies in further integrating hardware and software to help differentiate its products rather than going back to its roots as a consumer electronics manufacturer, according to Sir Howard Stringer, chief executive.

“What I am looking for . . . is to develop software applications that can differentiate our products and then use content as a sledgehammer to sell them,” he said in an interview with the Financial Times.

His comments suggest the new chief executive aims to build on the strategy of previous management to use content as a way to drive electronics sales.

Nobuyuki Idei, the chief executive who made way for Sir Howard this year, constantly spoke of the profits to be gained from marrying software and hardware. But he was unable to translate his ideas into profits, which fell wildly short of ambitious targets.

The strategy of fusing content with hardware has been central to Sony ever since it acquired Columbia Pictures, now Sony Pictures Entertainment, in 1989. But the recent dismal performance of Sony's electronics division has raised questions about whether it might be better to focus on either hardware or software.

Critics say Sony's electronics business has suffered from a lack of management focus. “Their ownership of both hardware and software is undermining [Sony]. It is negative synergy,” says Hiroshi Takada, analyst at JPMorgan in Tokyo.

Sony last week unveiled a restructuring programme aimed at revitalising its ailing consumer electronics business and returning the group to profitability by March, 2007. The plan, focused on the electronics business, appeared to signal a return to Sony's electronics roots.

But in his interview, Sir Howard said: “The future for me is a different business model, really. The consumer electronics company has to be refined and the television business clearly has to rebound. But the future of the business is . . . in champion products” to match innovations such as Apple's iPod.

Sales of Apple's popular portable audio player are driven largely by its iTunes music downloading service, and vice versa. Sir Howard said Sony had successfully employed the same business model with products such as PlayStation, which can also show films, and more recently with Sony Ericsson mobile phones, which comes with pre-installed music from Sony BMG.

Elsewhere, Sir Howard said, it had been slow to realise potential cross-fertilisations. The key to its future growth was in “finding a way to bring entertainment and content and everything else together”.

The first step was to break down the barriers that still existed throughout the group, including between the hardware and software divisions.

In the same interview, as reported in Saturday's FT, Sir Howard said concerns over morale and Japanese cultural sensitivities about big redundancies had made it hard to go further than he had with the company's restructuring.

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