Sony Regroups, Shuffles Execs, Targets 10 Percent RoE

TOKYO—Sony this week outlined its strategy for the next three years, including an executive shuffle that leaves Shigeki Ishizuka as president of the Professional Solutions Group, replacing Shoji Nemoto, who will head up the disc manufacturing business.

Sony’s primary target is 10 percent return on equity on consolidated operating profit of more than 500 billion yen (US$ 4.2 billion in current exchange rates) for FY2017, the final year of its three-year plan. The strategy consists of emphasizing profitability over “pursuing volume;” granting the business units greater autonomy while clearly defining them within the Sony portfolio.

Each of the business units is now defined as either a “growth driver,” a “stable profit generator,” or an area focusing on “volatility management.” Each will be assigned a target for return on invested capital linked with the 10 percent corporate RoE target.

“Growth drivers” include Devices, Game & Network Services, Pictures and Music, which together cover the CMOS business, PlayStation, movies and TV production. The CMOS business has been busting out on-demand for smartphone and tablet cameras. (See “Sony Boosts Stacked CMOS Production Yet Again,” Feb. 2, 2015) In Games, Sony said PlayStation4 sales surpassed 18.5 million units in early January. Although the PS4 is made by the independently spun-out computer entertainment business, Sony connects the devices through its network service, which had 10.9 million users as of Jan. 4.

With regard to the Pictures division, Sony said it will be “increasing its channel offering” and “strengthening its television production business.” It will focus on streaming in the Music division.

“Stable profit generators” comprise Imaging—which includes the broadcast business—and Video & Sound.

“While Sony does not anticipate overall market growth in these areas, the company will target certain areas within each market that are unlikely to experience commoditization…” it said.

Rather than making “large-scale investments” in the two divisions, Sony said it would focus on “optimizing fixed costs and enhancing inventory control.”

Video & Sound, the division in which headphones and Blu-ray players are made, is being spun out Oct. 1, 2015. This move follows the spin-out of the TV manufacturing business, which is in the “volatility management” category along with the smartphone division. Sony hinted at possibly selling both struggling businesses.

“Sony will seek to limit its capital investment and establish a business structure capable of securing stable profits,” the document said. “The company will also continue to explore potential alliances with other companies in these areas, in response to changes in the business landscape.”

The company also indicated it would continue spinning out business, but did not provide specifics regarding which ones.

Sony is struggling to return to consistent profitability after reporting its first overall loss in 14 years in 2009 when it reported a net loss for all operations of US$1.7 billion (exchange rates at the time). It has logged a profit just once since then: US$458 million for the fiscal year ending March 2013.

Net loss for FY2014 was reported at US$1.25 million. The Professional Solutions division—the subdivision of Imaging that includes the broadcast technology business—was stable from the previous year with US$168 million in revenues.

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