Sony Should Exit The E-Reader Business

Sony (NYSE: SNE) continues to humiliate itself with a series of poor decisions, many of which have severely damaged earnings. The latest of these is to launch yet another e-reader into a market that is already dominated by Amazon (NYSE: AMZN) and Barnes & Noble (NYSE: BKS). Sony said its new product will have hardware and software improvements compared to its current offering. Prices will range from $180 to $300. That means it will have no price advantage over competition.

Sony’s decision comes on almost the same day that Amazon announced it will release a tablet PC to compete with Apple’s (NASDAQ: AAPL) iPad. The Amazon product will have all of the features of its Kindle and most of the features of the iPad. The new Amazon tablet will run on Google’s (NASDAQ: GOOG) Android operating system. It will probably be priced in the $300 to $600 range, as the iPad is. The Amazon product will offer access to its large app store and music and video cloud system.

Sony’s e-reader will offer none of the advantages of a tablet PC. Its price will not allow it to claim that it is a better value than a $400 Amazon or Apple tablet.

Sony would impress investors if it gave up on certain products more often. The launch of its original e-reader was viewed as too little too late. The launch was into a market where Amazon had an 80% market share and an e-book store with over 700,000 books and magazines. Sony never had a chance to succeed. Everyone other than Sony knew that.

Sony has acted similarly in other markets. Its VAIO PC has only a tiny fraction of the laptop market. The same can be said of its internet TV product.

Sony continues to have successful digital camera, game console and TV products. It has its own movie studio, which, whether it belongs as part of a consumer electronics company or not, is usually profitable.

Sony has continued to go a bridge too far, and investors are the poorer for it.

Douglas A. McIntyre