Can Sony Get Back The "WOW" Factor?
Yasir is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For decades, Sony (NYSE: SNE) has been a leader and pioneer in electronic goods, including cameras, TVs and gaming consoles. However, the company has been left behind by competitors such as Samsung. Sony has been posting losses for several years now, but new CEO Kazuo Hirai is determined to take the company back to the top. Hirai aims to rebuild the company and once again make Sony a leader in the electronic industry with upcoming televisions, mobile phones and gaming consoles.
Sony's latest quarter showed an operating profit of $496 million, which reduced Sony's total losses for the quarter to only around $115 million. The weakened yen was one of the reasons for the profit; however, Hirai believes that Sony is heading in the right direction towards profitability.
Where Did Sony Go Wrong?
Once a leader in electronics, Sony lost major marketshare due to lack of innovation and product development. The downfall of Sony came along with missed opportunities and the company's unwillingness to accept reality and adapt the latest technology. One of the biggest reasons for Sony's downfall was that the company missed out on innovation in software. Also, Sony's entry into flat TVs and next-generation music players (the iPod Era) was too little too late. The ninth consecutive year of losses from the TV division contributed further to the company's downfall.
Sony's 3 key divisions are televisions, smartphones, and gaming, as these 3 are likely to shape Sony's future. Other divisions, including the films and music division, have been making profits with hits like Skyfall.
Sony's TV division is one of the major loss-making divisions and it needs to turn things around in order to get back on the right track. 4K, an even higher resolution than HDTV, is the future of televisions. Sony unveiled two new 4K television sets at CES 2013. Even though 4K isn't today's technology, the sets will be available this year, along with LG Display's (NYSE: LPL) 4K television sets.
One of the reasons why Sony has been left behind is because other Chinese and Korean companies, including LG, have been offering HDTVs for lower prices. However, Hirai recently said that Sony will not go for a price war and will only target customers who are willing to pay more. It's rolling out sophisticated offerings with technology such as OLED, a huge improvement on today's LCD screens; Sony released the world's largest 56-inch 4K OLED TV at CES, with LG and Samsung looming around with 55-inch 4K OLED TVs.
Sony Communications - Mobile Division
Sony Communications has gone through a major restructuring process after buying out Ericsson's share of the mobile division. Since then, Sony has released some stunning smartphones, but it's been once again left behind by Samsung and Apple (NASDAQ: AAPL). Sony still faces competition from other manufacturers, including HTC and Nokia but Hirai is almost certain that Sony Communications can be a major profit driver for the company.
After losing significant market share in recent years to Samsung and Apple's dominance, Sony has finally released a new flagship device, which is set to shine in 2013. The new Xperia Z features everything that users would want in a high-end smartphone, however, Sony focused on some additional ingredients in order to make the device stand out.
Finally, the gaming division will also be crucial for Sony's future, as Sony plans to unveil the long awaited PlayStation 4 on Feb. 20, in New York. Sony has been a pioneer in gaming consoles with its Play Station console, however, soon after the release of the PS2, Microsoft (NASDAQ: MSFT) came out with its own console, the Xbox.
Sony has been teasing users around with its latest PS4 "See the Future" ad campaign and the 20th of February will mark a new era in gaming. We'll still have to wait and see what Sony comes up on the 20th of February and how Microsoft responds.
Is a Comeback near?
Hirai's main strategy to lift Sony, from the ashes, is the new "One Sony" scheme, which looks solid. The company is set to invest further and create a major buzz in the smartphones industry. Previously, the company's Android smartphones never got much recognition but the newer smartphones are creating hype due to improved software and top-notch hardware.
Previously, Sony could not take steps to fire employees and cut down costs -- cultural expectations in Japan made that task difficult. However, Hirai has already started to cut down jobs in an attempt to lower costs, which Sony never did previously.
Another new strategy is that Sony will not be making too many products that resemble others on the market. Instead, it will now focus on cutting-edge technology, along with innovation, in order to make stand out or "WOW" products, which the company has been lacking for quite some time now.
Sony's future still remains uncertain, but the company looks like its heading in the right direction. Sony's new era, under the leadership of Kazuo Hirai, looks promising, and the restructuring of Sony is expected to lead the company back to profitability.
However, not much can be said about Sony's stock at the moment. Since the arrival of the new CEO, Sony has been improving and the decrease in losses is one of the signs of Sony's vision to become profitable again by the end of 2013. Some believe that Sony is still a sell, however, many are now optimistic with Sony, changing the ratings from Sony being a sell to a buy, including the Bank of America.
This is because analysts believe that Sony's new leadership is more than capable of taking the right decisions going forware and also, Sony will continue to take advantage of the weakened Yen. Aside from that, Sony is likely to get greater market share this year as the release of new products has been better than expected, with smartphones being Sony's major strength as operators are eager to market the company's new products.
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