Page last updated at 12:28 GMT, Thursday, 22 January 2009

Is Sony too big for its own good?

Duncan Bartlett
Business reporter, BBC News, Tokyo

A customer in front of a Sony TV store, Tokyo
A customer checks Sony's latest LCD TVs in Tokyo

Many icons risk being toppled by the global financial crisis. Firms which once could be relied upon to make steady profits are now losing money and shedding jobs.

One stark example is Sony - on course now for its first annual loss in 14 years.

I once visited the home of an eccentric Japanese friend who was obsessed by Sony. She had drawn the company's logo on dozens of little paper stickers and attached them to machines all over her flat.

Her radio, her hair-curler and even her toaster had turned into Sonys.

Electronics boom

Her passion for the brand developed in the 1980s - a boom time for the company. Its little portable tape player known as the Walkman sold 50 million units during that decade.

Sony then threw itself into the entertainment industry, buying CBS records in 1988, when Michael Jackson's Bad was the company's best-selling album.

In 1989, it entered Hollywood when it acquired Colombia pictures.

That kind of international expansion has long since ceased. Even if it wanted to buy other firms, now is not the time.

Sony says for the financial year ending in March, it expects to make a net loss of 150bn yen ($1.7bn; 1.2bn).

Of course, it's by no means the only major firm to suffer because of the global credit crunch. But the problems run deep.

Playstation losses

Take for example the Playstation 3 computer game console. It sells fewer than its cheaper rivals - Microsoft's XBox and Nintendo's Wii.

Models with Sony's Vaio P computer
Will the Vaio P computer really suit consumers' pockets?

Sony's been criticised for not cutting its price - but it loses money on each PS3 it sells, hoping to turn a profit when customers buy games.

The company plans to shut unprofitable parts of its consumer electronics operations, but its Playstation division will have to remain in order to save face.

It is cutting 16,000 full and part-time jobs from the electronics side of the company.

Although that may save money in the long term, the redundancies will cost the firm dear this year.

Some blame Sony's woes on its complex business structure. They say the management is too slow in responding to problems and the firm often misses its profits targets.

Sony's debts are estimated at about $10bn. Analysts from Credit Suisse, who've poured through the accounts say a major management rethink is needed.

Focus needed

Not that Sony has given up trying to innovate. It is currently in the throes of marketing a miniature computer known at the Vaio P.

The advertisements on the Tokyo subway system show the gadget poking out of the back pocket of a model in a tight pair of jeans.

In reality, the computer's rather too big for most people's pockets. One of the design team revealed to me that the jeans in the publicity photographs were specially made for the shots.

Maybe Sony is also just a bit too big. Too many product lines, too many sections, too many layers of management.

The current financial crisis has forced it to make cutbacks which its critics say were long overdue.

The focus now must now be on rebuilding the brand - and restoring the devotion of its admirers.

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