Sony is taking a page from Apple's playbook. On Nov. 19, Sony said it plans to launch an online store selling music, movies, and books as well as other downloadable applications for mobile products. Sony's top executives didn't specify when the Internet store, tentatively called Sony Online Service, would go live or what it would look like. But the online storefront, announced at a management strategy meeting in Tokyo, is likely to bear some similarities to Apple's iTunes store and would be Sony's most ambitious attempt to link its products to its own vast library of digital content.
Coming up with a software strategy for Sony has been Chairman and CEO Howard Stringer's mission since taking over in mid-2006. The adjustment hasn't been easy. Long known for the world-class designs of its flat-screen Bravia TVs, Walkman music players, and Cybershot cameras, Sony has struggled to use software to its advantage.
Analysts say that creating software to sell an array of online services and content is Sony's best hope of improving its fortunes. "Sony has been too focused on hardware  ," says Tokai Tokyo Research Center analyst Osamu Hirose. "It has to focus on networked products [and) delivering digital entertainment to consumers."
String of Losses
The global recession has pummeled Sony's businesses and left its earnings in a shambles. With consumers cutting back on electronics, Sony says it's heading for its second straight loss. This fiscal year through March 2010, Sony predicts an operating loss of $674 million, from last year's $2.6 billion loss. Sales are expected to slide 6 percent.
Sony's core electronics business has been its biggest problem. The two worst-performing products: TVs and video games. Reversing the losses of those divisions is crucial because they account for more than a quarter of Sony's $82 billion in annual revenues. The games division is expected to post its fourth straight operating loss. On Nov. 19, Sony said both the gaming and TV businesses aren't likely to see profits until next fiscal year. Stringer also pushed back the company's overall goal for a 5 percent profit margin until the fiscal year ending March 2013.
To help its chance of a comeback, Sony is trying to cut $3.4 billion in costs in the year through March 2010 by centralizing parts procurement, reducing inventory, and closing factories. By May 2010, it expects to have 47 plants globally, from 57 last February. "We know we have to restore profit in our game and TV business," Stringer told a news conference at Sony's headquarters. "We must deliver sustainable financial results." (continued...)
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