New Sony CEO, No New Future

Sony’s (NYSE: SNE) revenue fell 9% in the September quarter and the company posted a loss, one of a long series. The Japanese firm also said that its P&L problems would not improve soon. The cause of the losses are built into the current Sony business models, which means new management could take years to correct them. And that is only if new management makes proper decisions.

Sony named Kazuo Hirai as president and CEO. He replaces Sir Howard Stringer, who has run the corporation since 2005, and over the past seven years has run it into the ground.

Stringer’s biggest mistake has been to stay in two segments of the consumer electronics industry. The first is the manufacturing and marketing of LCD screens, which is a low-margin business, if not a losing one. The other is that Sony continues to make PCs, although there are a number of other PC makers with much larger market share. And, of course, there is the Apple (NASDAQ: AAPL) Mac.

During Stringer’s tenure, he was slow to get a world-class video game console into the market. PS3 sales have not been a disaster, but Sony has allowed its PS2 sales advantage to wither as Nintendo and Microsoft (NASDAQ: MSFT) have made market share gains. Whether Hirai’s engineers can upgrade the PS3 enough to take substantial market share, particularly from Microsoft, is an open question. Certainly, the process will be hard.

Stinger also made the odd move of taking over the half of the Sony Ericsson smartphone joint venture that Sony did not already own. Sony Ericsson sits in the market well behind the Apple iPhone, Nokia (NYSE: NOK) and a number of Android-powered products from electronics giant Samsung and nimble operators such as HTC. Even Research In Motion (NASDAQ: RIMM) has a better share than Sony Ericsson, which is extraordinary, given the Canadian company’s missteps. Stringer believes that Sony smartphones somehow can be tethered to its content and consumer electronics products. In other words, there is a hidden synergy between Sony’s current businesses and the smartphone company it has taken over in full.

Sony lost its lead in a number of consumer electronics arenas a decade ago. Stringer made the problem worse as Sony’s attempts at innovation failed. Now Hirai has to make Sony a success again, and that is too much to ask of any executive.

Douglas A. McIntyre