Japan's Sony Corp pushed back an elusive target of an operating profit margin of 5% to March 2013, as it heads for its second straight loss and loses ground to overseas competitors.
Sony, which is shedding jobs, closing plants and selling non-core assets this year, said on Thursday it now aims to earn a 5% operating profit margin and a 10% return-on-equity in the year ending in March 2013.
Sony Chief Executive Howard Stringer had originally set the 5% margin target in 2005 for the financial year to March 2008 but the company narrowly missed it, and its plans for recovery have since been waylaid by the economic slow down.
The maker of Bravia TVs and PlayStation game consoles said it would deliver on its promise to make its LCD TV and game operations profitable, launch 3D TVs and make a belated entry into lithium-ion batteries for electric vehicles.
Investors have been waiting for years for a convincing growth strategy from Sony management.
“It will be quite a challenge for Sony to turn its TV business profitable next year. Price declines are cancelling their cost cut efforts,” Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co said.
“I don't think many people were convinced enough today to go and buy Sony shares tomorrow.”
Sony, whose Bravias are now a distant second to leader Samsung Electronics Co Ltd in the global flat TV market, said it was aiming for 20% market share to achieve its new mid-term goal.
It also plans to launch 3D TVs next year, make a late entry into the promising market for lithium-ion batteries for electric vehicles at an unspecified time, and will work to grab 40% market share in 2012/13 for its electronic reading devices.
“Sony's internal cohesion has reached the point where they've been able to deliver on promises to restructure and also set forward a new product strategy,” Mitsubishi UFJ Securities analyst Masahiko Ishino wrote in a report to investors.
“But there are still many high hurdles left,” such as the ability to really supply strong and innovative products.
The maker of Cyber-shot digital cameras has cut 16,000 jobs since the global downturn last year and plans to reduce the number of its manufacturing sites to 47 by May 2010 from 57 in February 2009.
It plans to cut 330 billion yen in costs this business year to March 2010, and has already carried out about 80 % of the targeted reduction in the first half through September.
“We are better, we are leaner, we are faster. We have done some of the really difficult things,” such as closing factories, Sony's Stringer told reporters at a news conference.
But the company still needs to be more efficient, he said. “We are not satisfied.”
Sony, which is locked in a three-way battle with Microsoft Corp and Nintendo Co Ltd in the global game industry, also reiterated its goal to make its games profitable next year by cutting costs and expanding sales through 3D games.
Sony in September launched a cheaper model of its PlayStation 3 game console to better compete with Nintendo's Wii and Microsoft's Xbox 360.
Thanks to the more affordable version, the PS3 in September became the top-selling console in the United States for the first time since its release in late 2006.
PIONEER NO LONGER
Sony pioneered the mobile music market 30 years ago with its Walkman and once ruled the global television industry in the era of box TVs, but it is now struggling to keep pace with nimbler South Korean rivals and innovative US IT companies.
Its portable music players have been in the shadow of Apple Inc's iPod in recent years, while it is struggling to keep up with Samsung for other products.
In electronic reading devices, Sony and Amazon, the two largest players, are vying to establish a toehold in a market that they believe will become a profit driver as more consumers enjoy books, magazines, newspapers and other media on the book-sized tablets. (Reuters)