It’s all coming to a head at Sony — even as we write, as Sir Howard Stringer and other executives attend an evening press briefing in Tokyo to outline more detail of Sony’s sweeping restructuring plan.
Ahead of the briefing, the increasingly stressed-out consumer electronics giant stunned investors on Thursday afternoon Tokyo time with an announcement that it would post a $2.9bn annual operating loss - its biggest ever - due to sliding demand, a stronger yen and costs to restructure its ailing electronics operations.
The operating loss will be Sony’s first in 14 years, noted Reuters, underscoring deepening troubles for a company that has fallen behind Apple’s iPod in portable music, Nintendo in video games, and is losing money on flat TVs.
Just last month, Sony announced a massive restructuring programme, including at least 16,000 job cuts and five to six factory closures.
Behind the grim but terse public pronouncements have been long-simmering tensions between chief executive Sir Howard Stringer, the company’s first foreign CEO, and an “old guard” personified by Ryoji Chubachi, president of Sony and chief executive of the massive electronics division.
Some commentators have described the clash between the two as a “fight to the death”, that could well result in the departure of one or the other - though publicly, both sides have maintained a civilised cool.
Tensions have escalated over Sir Howard’s radical restructuring plans, announced in December. As the FT noted this week, the dispute centres on whether products such as televisions have become commodities, in which case, Sir Howard believes, Sony should cut its production costs and rely more on sales of software built into its gadgets - a view he has amplified, most recently at the US Consumer Electronics Show earlier in January. The pro-Sir Howard camp has portrayed the conflict as a noble campaign against the ossified forces of tradition - some even evoking the old “cultural differences” line used so often against foreign executives in Japan. The critics - and they are growing in number - say Sir Howard has had enough time to defeat the “enemy within” and has failed to do so.
There is acute sensitivity, too, about sacking Japanese staff, who believe that they have a “job for life”. However, adds the FT, a decision to spare them from the planned cuts would risk angering Sony’s foreign employees. A manager at Sony in the US said his colleagues saw “a lot of fat” in the Japanese operations.
Sony has already announced factory closures in the US and France as part of its restructuring plan, saying there will be five or six in total, as it seeks to save Y100bn ($1.1bn) in annual operating costs. However, it is expected to make further cuts after it has set out details of those plans.
The real problem, according to The Times Asian business editor and long-time Sony watcher Leo Lewis in a recent article, is the entrenched old guard:
Repeated efforts by Sir Howard to impose a stronger culture of co-operation between divisions have met with obstruction by Sony’s well-entrenched old guard and frustration for those that have sought to shake the company out of its stupor. Analysts at Nikko Citi said in a note published last month that Sony’s recovery would only come if power were more tightly concentrated in the hands of its chief executive.
Indeed, says Lewis, Sony’s embattled leader is preparing to unveil a series of restructuring efforts that would focus chiefly on making the electronics division more streamlined in Japan.
In an earlier article on Jan 5, Lewis noted that despite the promise of reform inherent in the appointment of Sony’s first non-Japanese head, sources close to Sir Howard describe three years of frustration as the company’s British-born chief has tried to impose changes on an unwilling entrenched management. Those frustrations - and a clear internal cultural clash between Japanese Sony and its US and European operations - have finally begun to be noticed by Japanese analysts. Several have started to call for Sir Howard to be free to take a “gloves-off” approach to running Sony, even if that means that the axe falls most heavily on the group’s Japanese operations.
Sony’s shares tumbled 2.56 per cent in Thursday’s trading in Tokyo to Y1,938, still below the critical Y2,000 per share level — an indication, according to the Times citing brokers at MUFG, that the market remains unconvinced by the cost cutting and business recovery efforts announced to date.
Related link:
Sony’ shokku’: the sequel - FT Alphaville
