News: Analysis & Commentary: EXECUTIVE SUITE
IT'S NOBOYUKI IDEI'S SONY NOW
Eight months after becoming president of Sony Corp., Noboyuki Idei has clearly established who's boss. On Dec. 5, he engineered the departure of Michael P. Schulhof, the 21-year company veteran who was president and chief executive of the company's U.S. operations, including its record label and Hollywood studio. From now on, those operations will report directly to Tokyo.
Now, the 58-year-old Idei has a chance to put his imprint on the $45 billion technology giant. True, Norio Ohga, 65, remains chairman and CEO. But it is Idei who is rewriting Sony's agenda. He talks of becoming a "Digital Dream Kid," pushing Sony beyond its audiovisual roots deep into the worlds of computers and communications.
Movies and music will remain part of Sony's formula--indeed, Idei has not indicated that he will exit the music business or sell Sony's film studio, as some analysts have suggested. But even more important will be the merger of digital technologies into appealing new products, from high-resolution televisions to multimedia eyeglasses (table).
On Nov. 14, Idei unveiled the most controversial component of his plan: to enter the cutthroat personal-computer business in late 1996, in alliance with Intel Corp. Idei and his lieutenants hint that Sony will soup up its PC with video games created by the Sony Playstation team and special screensavers from Sony Music.
LACK OF CONFIDENCE? It was the move into PCs that helped precipitate Schulhof's departure from the company. The American apparently believed that Sony shouldn't be getting involved in what he perceived as a low-margin business. In PCs, Schulhof said in a Dec. 6 interview, "the only people who make money on a consistent basis are Intel and Microsoft."
Of course, it wasn't just a difference of opinion on PCs that led to what Schulhof calls a "mutual and amicable" decision to resign. One top Sony executive says Idei had lost confidence in Schulhof's ability to achieve the oft-promised synergies between Sony's electronics businesses and its movie and music operations. No wonder: Sony has poured more than $5 billion into Hollywood since 1989; a year ago, the company wrote down a massive $2.7 billion from Sony Pictures Entertainment Inc.
Schulhof and Idei also disagreed on how to finance Sony's expansion and reduce its debt, which has risen to a steep 76% of capital. Schulhof advocated raising money via a partial spin-off of U.S. operations. Idei disagreed. A Sony source says media baron Rupert Murdoch recently approached Sony about making an investment in the company's U.S. entertainment properties but was rebuffed.
Schulhof didn't help matters by living a lavish lifestyle that clashed with those of his more modest Japanese bosses. Unlike both Sony co-founder Akio Morita and Ohga, Idei never developed a personal relationship with Schulhof, preferring to communicate by memo. Schulhof declines to comment on his differences with Idei but says: "I recognize that Mr. Idei needs his own breathing room. He's president."
Idei wants to hang onto Sony Pictures and Sony Records in part because they can feed new gadgets such as the MiniDisc. But Idei's clear emphasis is on hardware. In recent months, Sony has announced a string of products and ventures in the world of "digital convergence." It has also rolled out high-definition televisions that, coupled with laptop PCs, can bring vivid multimedia images from the World Wide Web straight into the living room. Sony is co-developing a TV settop box in cooperation with Microsoft Corp. With San Diego-based Qualcomm Inc., the company is working on digital cellular telephones. Sony recently set up an online information service in Japan.
The object: mining the "hidden Sony," as Sony Electronics Inc. President Carl Yankowski calls it. "The convergence of audio, video, computers, and communications is the sweet spot in our new business model," Yankowski says. Of course, Sony isn't the only company trying to hit that sweet spot. Netherlands-based Philips Electronics and France's Thomson, among others, are equally intent on creating new types of digital products and tapping into the Internet. But Idei, having consolidated his authority, seems convinced that he and Sony's vaunted engineers can become the industry's "Digital Dream Kids."
BEYOND THE DISCMAN
High-tech consumer products Sony may build:
NET-READY TELEVISIONS Wide-screen, high-resolution TVs that double as computer monitors and bring the World Wide Web into the living room
MULTIMEDIA EYEGLASSES Wireless projection of television images and data onto eyeglass lenses will let users watch movies or read E-mail on the go
ONLINE STEREOS With special software, audiophiles will program a 100-disc CD changer from a PC and download jacket information from the Internet
WEB APPLIANCES A variety of stripped-down PCs and handheld personal digital assistants will let users browse the World Wide Web for less than $500By Peter Coy in New York and Ronald Grover in Los Angeles, with bureau reports