Thu Feb 9, 2012 11:59am EST
* Hirai says ready to make tough decisions on cost cutting
* On track to return TV business to profit in 2 years -Hirai
* Sees LCD as main TV market product for next 3 years
* Sony shares up 13 pct since Hirai named as next CEO
TOKYO, Feb 10 (Reuters) – Incoming CEO Kazuo Hiraiaims to re-shape Sony Corp by linking hardware andsoftware through online networks – a model he used at thePlayStation maker’s computer entertainment unit.
“It’s a bigger concept we can grow into a bigger space forSony overall,” Hirai, 51, said in a group interview with foreignmedia at the company’s Tokyo headquarters.
“It’s a business where hardware drives software and softwaredrives hardware, and it’s all tied up by the network,” he added, referring to efforts to sell games, movies and other content toconnected PlayStation owners.
Hirai formally succeeds Howard Stringer as CEO on April 1,with the once-stellar consumer electronics brand heading forwhat it warned last week would be a much bigger-than-expected$2.9 billion annual loss, its fourth in a row.
Under intense pressure from investors and ratings agenciesto staunch losses at the sprawling electronics group, Hiraipledged not to flinch from tough decisions to trim costs, andrenewed a promise to return the TV business to profit in twoyears.
“We have to make some hard decisions on where there are someredundancies and reduce the fixed costs in a variety ofdifferent areas,” he said, pointing to sales units in Japan,Europe and the United States, supply chains and Tokyoheadquarters functions as areas where cuts could be made.
Credit ratings agency Standard and Poor’s on Wednesday cutits long-term debt rating on Sony and warned it may drop itanother notch within a year if Hirai fails to stem TV losses anddeliver a significant boost to profitability. Sony was also downgraded by Moody’s last month.
The TV division has lost more than $11 billion over eightfiscal years. Together, Sony, Panasonic and Sharp expect to lose $17 billion this year alone,highlighting the savaging of Japan’s electronics industry byforeign rivals led by South Korea’s Samsung Electronics, weak demand and a strong yen.
A goal for Sony to end that bleeding in two years was”tracking where we said it would be at the end of the year, or alittle ahead of that,” Hirai said.
Better products would, he said, add as much as 40 billionyen ($520 million) in profit, with cost improvements addinganother 50 billion yen, as part of a strategy he described as”defense and offense”.
As well as weak global TV demand, Sony has been hammered bylast year’s flooding in Thailand that ruptured supply chains, abig one-off charge for exiting a flat panel joint venture withSamsung, and smart competition from Apple Inc andSamsung that has squeezed market share in TVs, smartphones andother gadgets.
Hirai predicted that LCD technology would remain the mainbattlefield in TVs for at least three years, before nextgeneration technology takes hold.
Hirai has yet to reveal his management line-up, naming onlyTadashi Saito, a former Sony chief financial officerat SonyElectronics in the U.S., as the company’s first chief strategyofficer since 2005.
Saito will work with senior managers “to formulatestrategies for group companies overall, as well as giving us alot of input and advice on M&A activity,” Hirai said.
Hiroshi Yoshioka, previously identified by Stringer as oneof “Four Musketeers” who could succeed him, along with Hirai,will take Sony into the medical imaging business and head up thegroup’s innovation center, “seeking out new businessopportunities”, Hirai said.
Sony shares have jumped 13 percent to a 14-week high of1,544 yen since Hirai was named as the next CEO, outperforming a2.1 percent gain on the benchmark Nikkei average. Thestock slumped more than 60 percent during Stringer’s 7-yearreign.
A Sony veteran of 28 years, Hirai was credited with revivingthe PlayStation gaming operations through aggressivecost-cutting, in competition with Nintendo’s Wii andMicrosoft’s Xbox.
A year ago, Hirai, a fluent English speaker, was promoted tohead the consumer products and services business, overseeingSony’s network operations. He was also at the forefront ofefforts to counter hackers who accessed Sony customers’ personaldetails, including credit card information.
He takes over after a period of cost cutting by Stringer, arare foreign CEO in Japan who sold off TV factories in Spain,Slovakia and Mexico and outsourced more than half of the group’sproduction to outside companies, including Hon Hai PrecisionIndustry, a Taiwanese contract electronics maker whosekey customer is Apple.
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