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Two years later, Stringer argues that that losing year, too, would have been a winner had it not been for the “Lehman shock,” his shorthand for the 2008 global financial crisis. He chuckles about a public remark he recently made about Sony being spared “toads and pestilence.” But he looks uncomfortable about what many people—and certainly Wall Street—could see as excuse-making. “You can’t keep on saying that, ‘I had this and I had that.’ When the Thailand floods hit, I thought, well, wait a minute. If you add to that the yen, you don’t feel sorry for yourself, but you do occasionally say, if some of my competition had the same experience. …”
Both Stringer and Hirai have vowed that Sony will stay in the TV business, despite calls for the company to consider dumping it. Stringer talks about Sony’s profusion of products as if it were a badge of honor or a competitive advantage. “Why don’t you sell?” Stringer asks himself, rhetorically. “Because that’s the Sony legacy, I can’t do that. Everybody at Sony is very proud of the hardware they create.” Hirai says Sony has lowered TV sales targets and will continue to shed assets, cutting staff and factory capacity as it outsources more production. Echoing Stringer’s view that Sony needs to produce a “different kind of TV,” he says Sony is working on prototypes that replace commodity LCD and plasma TVs. “We’re going to move onto these new technologies sooner rather than later,” Hirai says. Sony hopes to get its cool back with ultralow-power, glasses-free 3D sets that double today’s resolution, though they’re not expected to be mainstream until at least 2013.
In October, Sony bought Ericsson’s share in the companies’ mobile-phone joint venture. The rapidly growing smartphone market presents ample opportunity, seeing as Sony is far behind Samsung and Apple with virtually no presence in the U.S. Sony must rely on Google to continue to improve the Android operating system that underpins Sony’s tablets, smartphones, and some TV efforts.
Consumers should expect to hear more about Sony Entertainment Network, the company’s most ambitious effort yet to connect all of its devices with all of its content. In addition to movies and music delivered through the disaggregated magic of the cloud, Hirai, who’s overseeing the project, is pushing his team to create additional services and exclusive content. That could include everything from Sony-produced TV shows to extended scenes from movies such as The Amazing Spider-Man and Arthur Christmas.
“The plan is to bring everything under the Sony Entertainment Network umbrella,” Hirai says, including the PlayStation Network and its 45 million unique users. He adds that only now has hardware become powerful enough to deliver Sony content across all four screens of TVs, smartphones, tablets, and computers.
As Stringer’s probable replacement, Hirai is crucial to Sony’s future. A tall native of Japan, the 50-year-old speaks perfect English, sounding like a man in a hurry, and commutes between Tokyo and California, where his family lives. His experience running the PlayStation business and early years working with Sony Music Entertainment give him an “understanding of how hardware and software need to be in lockstep,” he says.
He and Stringer say everyone at Sony is now rowing together. Last year, Hirai moved hundreds of PlayStation employees from the hip Aoyama section in Tokyo to Sony headquarters in grittier Shinagawa. The move was symbolic—breaking down the old PlayStation isolation—as well as practical, saving money and making it easier for everyone to work together. Hirai says it made him briefly unpopular.
Jeff Loff, the Macquarie analyst, wonders why Sony doesn’t take bolder steps to right its TV business—perhaps a huge round of layoffs. “I don’t think they know what to do,” he says. Loff started covering Sony earlier this year, around the time of Japan’s earthquake. His early assessments of the company were kind. After he ranked Sony as an “outperform” stock, Macquarie sales staff asked him if he was nuts. “They said this company always overpromises and underdelivers,” Loff says.
As summer went on, the 34-year-old analyst became more inclined to agree with the sales staff. His reports got crankier. In an Aug. 30 report titled “Pushing Reset,” he downgraded his rating to “neutral” and noted something remarkable. For the past nine years, the business that has accumulated more profit than the rest of Sony combined is financial services, mostly life insurance, with some auto insurance and banking. “Sony,” Loff says, “is a life insurance company with a money-losing TV business.”
Informed of this analysis, Stringer shrugs and says, “Yeah, it’s been a big moneymaker.” Breakfast over, Stringer is headed to a memorial service for Andy Rooney, then to the Sony offices in Midtown. Rumors have again floated that his resignation might be imminent. Not true, Stringer says. “I’m still here because I love the place. I completely believe in the vision and I think we’re getting there. But you can’t expect people to be patient.”
Gruley is a reporter for Bloomberg News in Chicago. Edwards is a reporter for Bloomberg News in San Francisco.
