Posted by: Kenji Hall on October 30, 2009
Sony’s future is looking a bit brighter. The company said today that it now expects an operating loss of $655 million (60 billion yen) rather than $1.2 billion (110 billion yen).
This despite an operating loss of $356 million (32.6 billion yen) in the July-September quarter, from a profit of $120 million (11.05 billion yen) a year ago. Many analysts had expected Sony to post a bigger loss.
Still, Sony has a raft of problems to fix. Its mobile phone joint venture with Sweden’s Ericsson is struggling in the smartphone market. And while the profitability of its gaming and TV businesses are improving, they are expected to continue losing money for some time. Chairman and CEO Howard Stringer plans to discuss Sony’s latest strategic plans at a press event in November.
Here’s an excerpt of the Q&A part of today’s press conference with Sony’s CFO Nobuyuki Oneda:
Q: When do you expect games and TVs to stop losing money?
Oneda: We want them to be in the black as soon as possible—hopefully by next year. For TVs, it takes time to revamp the supply chain. We’ve made very detailed changes, and in just one year we’ve cut back and overhauled the entire operation. In November, we will explain what our business plans are for next year. We’ll talk about our 3D TV plans, too.
Q: How are the PS3 cost reduction efforts coming along?
Oneda: The PS3 now costs about 70% less than it did when it first came out (in November 2006). PS3 costs are now more than 10% higher than revenues from the console. By the end of the year, that difference will fall to one digit. And by next fiscal year, the PS3 should be making money.
Q: Can you offer any specifics about your strategy for the yearend holiday?
Oneda: We’re focusing on how much sooner we should launch our new TV models that we’d planned for spring. Unfortunately, Samsung is beating us in liquid-crystal display TVs that use a light-emitting-diode backlight. We miscalculated. If move up the launch of our new models, we think we can improve our profitability. And we’re continuing to cut costs.
Q: Samsung reported big profits today. What’s your take on their results?
Oneda: One of Samsung’s strengths is that they make their own LCD panels. The Samsung group uses the amortization on investment in assembly lines to their advantage. The Korean won also has fallen about 30% against the U.S. dollar. But basically I think our disadvantage is the inferiority of our products. We have to recognize that. You might say we lost the marketing war. Sony put LED backlights in LCD TVs before Samsung. But we put them mainly in high-end models. Samsung had them in their high-end and mass-market models. That was the strategic difference. We can definitely learn a lot from their TV operations and supply chain management. We need to raise our operations and products to their level by next spring. After that, we want to close the gap with 3D and device technology.
Q: How will you compete with Samsung?
Oneda: Our basic strategy is, we want to do the high-end TV models in house. The entry-level TVs will be outsourced to cut costs. We’re putting a lot of energy into selling TVs in emerging markets. As for whether we plan on owning panel-making plants, we’re still making LCD panels in our joint venture with Samsung. Besides that, we’re working with Sharp. And we’re buying LCDs from Taiwan. We’re trying as much as possible to reduce the cost of our panels.
—With Hiroko Tashiro