Sony's TV Business loves fade to red

Dennis Hallinan/Alamy

By Cliff Edwards

A Sony outlet store is located in the shadow of the twin cooling towers of the nuclear power station of Limerick (PA). Signs on the merchandise within Show how bad for the consumer electronics giant has been struggling to stave off a financial meltdown. Flashy flat-panel sets, taking half of the 6,000-square-foot store; all tout hefty cheapen if Sony is trying to clear inventory for new models. Two months ago, predicted Sony optimistic that it would sell 27 million handsets this year; on 28 July it drastically the figure to 22 million and a profit warning issued.

The business television, Sony's biggest revenue GENERATOR, is expected to lose one billion dollars this year — after seven straight years of red ink. Royal Philips Electronics and various other longtime rivals have called it quits, saying they can't compete if prices in commodities territory tumble. But Sony Chief Executive Officer Howard Stringer eight TV unit vital to help sell products that work with the company sets, including Blu-ray players and its popular Playstation game consoles.

On 1 Aug. Sony said it would its TV activities not shedding and the next day announced that a reorganization of the unit is in the works. Masashi Imamura, who replaced on 1 Aug. Yoshihisa Ishida as Chairman of the home entertainment unit, not much time to come up with a turnaround plan. Details of the reorganization should be decided by 31 August, spokeswoman Mami Imada says. "There will be no Holy zone," Sony said in a statement. Stringer was not available for comment.

There is little fat left to cut. Stringer has already eliminated 30,000 jobs, entered into joint production ventures with rivals, and assets. In March 2010, Sony decided to sell 90 percent of a TV factory in Nitra, Slovakia, to Foxconn Technology Group of Hon Hai Precision industry unit, after unloading of 90% of its largest North American TV-create site to the Taiwan-based company. Six months later, Sony decided to sell another TV facility in Barcelona. It is even started with outsourcing of production of lower-end collections to other manufacturers.

Sony's vow that it can eke out profits by focusing only on sales of sets with striking features such as 3D displays has its skeptics. The company was last year October the first set maker to sell Internet-enabled TVs that use Google software in the us still came in third in overall sales behind Samsung Electronics and low priced upstart Vizio.

Another Japanese set maker, Pioneer Electronics, predicted in 2009 that consumers would flock to premium products and quickly from the business at all if Samsung was inaugurated and Vizio used their supply chain prowess and larger volumes to sell similar set to rock-bottom prices.

"My generation was willing to pay a premium for that brand [Sony]," says Jack Ablin, chief investment officer for Harris Private Bank, that $ 60 billion in assets oversees. "They were innovators. They had quality, and they had consumers. But the rest of the world has caught up to them. I'm not sure what their edge is more. "

Sony's widescreen woes are not unique. Most major manufacturers sit on six-to 10-week inventory such as consumer show little interest in the latest features such as the sets with Internet connection or those movies in 3D display can, says IHS iSuppli analyst Riddhi Patel. Not helping matters is the turn of the smaller screen size devices such as iPhones and iPads competing for consumers ' disposable income.

Many investors, who have seen Sony lose half of its market value since 2005, would undoubtedly glad to see a "for sale" sign posted on the TV company. A major obstacle that, however, is that the TV revenue helps pay for expenses such as research and development at Sony's other divisions, said Kazuharu Miura, an analyst at Nikko-Securities SMBC in Tokyo. Lose that revenue profit would mean could suffer from the companies that are subsidised, he says. "When that income is gone," Miura says, "the company will have more drastic cost cutting do. You really need the courage to do that. "

The bottom line: Sony has lost more than $ 74 billion in market value since 2000, partly thanks to misery over the management of the TV. The unit lost money for seven years.

With Mariko Edwards Yasu is a reporter for Bloomberg News in San Francisco.