The Nikkei reported this week that Sony Corp. has finally taken a bold step to reorganize its business by putting its VAIO computer division up for sale. According to the report, the company is in negotiation to offload the division to Japan Industrial Partners (JIP), a Japanese investment company.
See why this move makes sense…and why their TV division is the next target for a shake-up…
According to the plan, JIP will create a new company and it is this company that Sony will sell its computer business to for a price reportedly between ¥40 billion – to – ¥50 billion ($391 million to $489 million). This new entity, which was not named, will continue to sell the Sony computers under the VAIO name.
Sony may continue to hold a small stake in the firm, but clearly JIP will own and run the new company. JIP has said it may withdraw from certain overseas markets and countries, but it most certainly will retain the operations in any part of the world where the brand is relatively strong.
Selling the division for a loss, pushing the company into a loss…
The Nikkei says that Sony will sell the division at a loss which will push the parent company to report an overall net loss for the year. This is the company’s first net loss after two years of reporting a small net profit.
In a way, Sony’s struggles in failing to adapt to the dramatic changes in the computer business are analogous to its struggle in the TV business – which many industry analysts think will be the next area of major reorganization.
TV business follows the pattern of the computer business…
Much like the computer business, where parts and components were cheap and easy to assemble drawing in a flood of competitors such as Taiwan’s Acer and China’s Lenovo, the TV business suffered a similar fate. In the older analog days of TV, Sony was the king with what many people felt was the best TV tube in the business…the vaunted Sony Trinitron.
But the transition to digital flat-panel TVs, where everybody bought the same panels from the same handful of major suppliers, caused TVs to be cheap and easy to assemble…pulling in a flood of competitors and profit erosion. It also became harder to differentiate brands, as they all used basically the same technology.
Finally summoned the courage…
Now, as the Nikkei put it, “Sony has finally summoned the courage to let go of personal computer operations.” Now the company needs to make a similar bold move with their TV division.
Why? Well, first and foremost, Sony’s TV division lost money last year…a lot of money. AND it lost money the year before that…and the year before that…and the year before that…and – well, you get the idea. Sony’s TV division has lost money for the last nine years in a row, with the largest loss registering ¥69.6 billion ($680 million) in 2012. That’s a pretty good reason for a dramatic new direction.
Three targeted technologies…
Sony’s current CEO Kazuo Hirai has picked three main businesses for the once dominant CE brand to focus on: smartphones, video game hardware and image sensors. And the company has made some gains here – smartphones have doubled in unit volume…and sales of the latest video game system are said to be strong.
Still, Sony has – up until this decision to sell off computers – been resistant to make big moves. But the time to play “small ball” has passed. Sony clearly needs to step up to the plate and start hitting some boomers.
Sony’s plan this year was for 4K Ultra HDTV to lift their TV division into profit. However, a company official admitted to the Nikkei that the TV division may lose money again this year.