Posted by: Kenji Hall on November 26
It's been a hard slog for Sony in flat-panel TVs. The business has lost money for the past five years, and is expected to do so again this year. In recent months, Sony's global TV market share has slipped, even as market leaders Korean rivals Samsung Electronics and LG have held their own. And Sony has struggled with an inefficient supply chain and a less-than-ideal model mix.
Since April, it's been Hiroshi Yoshioka's job to fix the TV business. Yoshioka was appointed head of the Consumer Products and Devices division following a shakeup in the top management ranks. "I've been too busy," he told reporters at Sony's headquarters in Tokyo, on Nov. 25.
Yoshioka's top priority is to make TVs profitable by next fiscal year, through March 2011. That's no small feat. Citigroup Global Markets Japan analyst Kota Ezawa has forecast that the TV business will post an operating loss of $720 million this fiscal year, ending in March 2010. "We know we have to restore profit in our game and TV business," Sony's Chairman and CEO Howard Stringer said during a Nov. 19 news conference.
Cost cutting will be key. Sony now plans to outsource 40% of its annual TV output next fiscal year, from about 20% of the 15 million sets it expects ship globally this year. Taiwanese contract manufacturers Hon Hai Precision Industry and Wistron would mainly focus on producing Sony's smaller sets, which consumers in entry markets can afford but earn razor thin margins. Those manufacturers have the machines for stamping metal sheets and resins and other materials in-house--not to mention a less expensive work force--to produce TVs for a lower cost than Sony can.
Yoshioka isn't only taking an ax to his division. He's also adding features to TVs. Next year Yoshioka says Sony will sell its first TVs capable of playing 3D movies and games. He predicts that up to half of all Sony TVs could be 3D-ready in 2013.
Continue reading "Sony Gets A TV Repairman"
Posted by: Bruce Einhorn on November 25
Koenigsegg Group's decision to walk away from a deal to buy Saab is not just a blow to GM, which now probably has no choice but to shut down Saab completely, and the automaker's workers. It's also a setback for China's auto industry's global ambitions. Beijing Automotive Industry (BAIC) had been one of Koenigsegg's partners in the Swedish sports-car maker's proposed acquisition; under the terms of an MOU signed in September, the Chinese company was going to be become a minority shareholder in Koenigsegg, which in turn was going to take Saab from GM.
That kind of minority role would have worked well for BAIC. As my colleague Ian Rowley wrote in September, when BAIC first made its deal with Koenigsegg, Chinese automakers have typically not been all that successful in their attempts to expand beyond China. And as BusinessWeek columnists Anil Gupta and Haiyan Wang wrote in August, BAIC "has no experience in mergers and acquisitions, whether domestic or cross-border. Success at postmerger integration requires highly cultivated and deeply embedded organizational capabilities. Such capabilities have to be built through experience. They can be neither bought nor rented."
That's why the Saab deal could have been such a good fit for BAIC. As a shareholder of Koenigsegg, the Chinese company would have been well-positioned to have its managers observe the integration process and gain the sort of experience that could help BAIC if or when it decided to do an acqusition of its own. Now BAIC won't have that chance.
Posted by: Bruce Einhorn on November 24
A week after President Obama's trip to China, relations between the two countries have taken a new hit. Today's China Daily, the government's official English-language newspaper, has a story filled with quotes slamming a report by a commission appointed by Congress that, among other things, accuses China of conducting cyber spying in the U.S. A spokesman from China's foreign ministry denounced the U.S.-China Economic and Security Review Commission (USCC) as "this so-called commission." The spokesman went on to say "this report disregards the facts, is full of bias and has ulterior motives," and the newspaper cited so-called "commentators" (see, two can play at that game!) alleging the report is just a response to falling approval ratings for Obama.
It's easy to see why China's government is upset. According to a statement on the USCC website, the Report lists a series of Chinese sins. "Despite evidence that global economic imbalances helped fuel the financial crisis, China persists in maintaining a wide variety of industrial policies to support an export and investment-led growth model. China continues to accumulate record sums of foreign currency reserves as a result of large trade surpluses. These surpluses result, in part, from China's extensive web of subsidies to favored industries, which include tax rebates, low interest loans from state-owned banks, discounts on land, electricity and fuel, and a currency that is pegged to the U.S. dollar at an artificially low rate." The USCC goes on to describe "stepped up efforts by China to penetrate U.S. computer networks, particularly those of the U.S. government and contractors, and to obtain information by increasingly sophisticated espionage methods."
To be fair, the Chinese government does have a point: The USCC is biased. Under both Democratic and Republican presidents, the USCC has tended to take a harder line on China than the administration. That's natural, since congressmen and women from both sides of the aisle typically feel freer to take aim at Beijing than officials from State, Treasury, Defense or the White House. The 2000 law that created the USCC calls for it, among other things, to focus on issues such as proliferation, WTO compliance and "the implications of restrictions on speech and access to information" in China.
Still, the USCC doesn't have any actual authority, and Beijing is probably counting on Nancy Pelosi and other Congressional leaders to file the report away somewhere and ignore it. That Chinese strategy seems to have worked fine in the past: This is the seventh report by the USCC, after all. With the unemployment rate above 10% and an election year approaching, though, the latest report by this "commission" might prove to have legs. There's a lot of anger in America and voters might feel inclined to support candidates who want Washington to be more combative toward Beijing. China's government should keep that in mind in the weeks ahead as it follows up on Obama's visit by deciding whether or not to let the currency appreciate. Movement on the yuan would give Obama and his supporters on the Hill a chance to argue that the president's less confrontational approach to China makes more sense for the U.S.
Posted by: Kenji Hall on November 20
Sony's Kazuo Hirai has a lot of ideas about what he would do if it had an iTunes-like online store. The company wouldn't just sell digital music, movies and books for Sony products, said Hirai, executive vice-president for networked products and services. It would also try to connect users with each other.
Hirai, who unveiled plans for the service--tentatively called Sony Online Service--on Nov. 19, said he hopes for a release next year. "Earlier in the year would be a lot more preferable," he said, during an interview at Sony headquarters in Tokyo.
Since taking over in mid-2006, Sony's CEO and Chairman Howard Stringer has repeatedly said he wants to create a link between the company's electronic products and digital content such as music from Sony's recording label and TV shows and movies from Sony Pictures Entertainment. What's taken so long? "There was always a vision," Hirai said. But before Stringer appointed a new management team and changed the organization chart in February, the company was riven by too many warring factions, he added.
The new online service online is expected to see a gradual rollout to different Sony products. The company plans to have consumers register for the service the moment they pull a TV or music player out of the box. That would lock them in, much like Apple does with its iTunes Store. If done right, the online store concept could also win a following for the brand.
Hirai said Sony would take the iTunes idea a step further: social networking features. So consumers could use their online accounts to save home videos or photos they shot for friends and family to see. "It's not just access content, stream it, and enjoy," he said. "What are your friends watching right now? There's a screen that says all the programming that's available. It highlights all the things that your friends are watching, for example. It's a community experience."
The hope is that all of the online content available would differentiate Sony's products from competitors. "Take LG or Samsung," he said. "They have some great devices. No services."
The store has huge potential to become a fount of cash. Consider the PlayStation Network. The Web-based gateway for PlayStation 3 video game consoles has been Sony's most successful push into online commerce so far. Launched three years ago, the PlayStation Network has 33 million registered users and sells thousands of downloadable games, TV shows, and movies. It has helped win converts inside the company, Hirai said.
Sony expects the PlayStation Network to bring in $500 million in revenues this fiscal year through March 2010--triple last year's total. Add in the new online service and the hundreds of millions of networked products Sony expects to sell, and the company's revenues from downloads and other paid-for services on the PlayStation Network and the new online service could top $3.3 billion by March 2013, Hirai said.
The new online service will be based on the PlayStation Network. Sony will encourage gamers to sign on to the new service by letting them do so through their PlayStation Network accounts.
Continue reading "Sony's Hirai Talks About An i-Tunes-like Store"
Posted by: Bruce Einhorn on November 20
A day after President Obama left Asia after an 8-day visit, Jon Huntsman, the American ambassador in Beijing, tried to counter the spin in the media that his boss's China visit didn't go so well. Speaking at a BusinessWeek conference on Friday morning, the former GOP governor of Utah pointed to agreements between the two countries to promote cooperation on the global economy, climate change and clean energy, and regional security. "Much was accomplished," said Huntsman, who also reminded his listeners that he had been national co-chair of the McCain campaign last year and so was representative of the "bipartisan approach to the U.S.-China relationship."
Huntsman spoke mostly in English but he is fluent in Mandarin and spent a few minutes speaking in Chinese. It was during the Chinese portion of his speech that Huntsman called Sino-U.S. ties "the world's most important relationship." That recalls the famous description that Mike Mansfield, the U.S. ambassador in Tokyo during the 1980s, gave to Japan's relations with the U.S. Back then, Mansfield liked to say "the U.S.-Japan relationship is the "most important bilateral relationship in the world, bar none." Now that honor goes to Japan's giant neighbor. And oddly enough, Mansfield himself, the ultimate booster of Japan-U.S. ties, predicted this would happen. Consider this interview he gave to Japan's Nikkei newspaper ten years ago. Talking about his "bar none" description of ties between Tokyo and Washington, he said "I don’t know how long it’s going to last, though, because you have China on the horizon….China will become more powerful in the decades to come. So far, China has held its head above water better than Japan has and, in doing so, China has become something of a stabilizing factor in East Asia and in the rest of the world….China could be in a position to threaten Japan’s supremacy in Asia. That is the major reason for me to emphasize that it is essential for Japan to rebuild its economy quickly."
Japan didn't change quickly, though. China did. And now it's the U.S. ambassador in Beijing, not Tokyo, who gets to crow about the importance of his job.
