Posted by: Kenji Hall on January 22, 2008
Sony’s out. That’s according to Goldman Sachs analyst Yuji Fujimori, who downgraded Sony (from “buy” to “neutral”) today, effectively telling investors to remove the stock from their shopping carts (but don’t toss what they already own).
In his nine-page note, he offers three reasons. The first two are beyond Sony’s control: the yen’s surge against other major currencies and the seemingly imminent danger of a slowdown in the U.S., where Sony pulls in roughly a quarter of its revenues.
The third, though, is something the company can do something about. Fujimori wants Chairman and CEO Howard Stringer to explain what’s in store for Sony over the next few years. A new mid-term plan, like the one Stringer unveiled soon after he took control in mid-2005, would go a long way to placate these antsy analysts. So far, Stringer’s answer to the question “what will you do once your profit margins surpass 5%?” has been to stress Sony’s investments in innovation. He has pointed to last year’s commercial launch of the world’s first super-flat-screen organic electroluminescent, or OLED, TVs. Fine. But OLED TVs are for now a niche product, not something that’s going to help the company in the next, say, three years.
What analysts are asking for is a roadmap. They want to know that Sony isn’t just rolling out new products willy-nilly. They want details, not the vague musings from the top brass about plans to merge music, movies, TV shows and video games more seamlessly with its hardware. Or, even better, a demonstration. Stringer might do that with the launch of the PlayStation Network, which would channel all this digital content through the PlayStation 3 gaming console in the coming months. Once he does that, though, he’ll face the inevitable questions about how he plans to slow Apple’s momentum. Ultimately, it’s a perception game and Sony has to show that it has a grand vision for delivering easy-to-use gadgets with on-demand content.