Sony Reveals Turnaround Initiatives; Targets 5% Annual Op. Income Margin By FY13 End - Update

(RTTNews) - Japanese consumer electronics giant Sony Corp. (SNE | Quote | Chart | News | PowerRating) Thursday said that it is implementing additional transformation measures centering on four initiatives to permit further growth and continue to enhance profitability. The company targets these measures to lead to a 5% operating income margin annually and a 10% return on equity by the end of the fiscal year ending on March 31, 2013.

The company said that under the leadership of its new management team established in April 2009, it has reformed its organizational structure to bolster profitability and transform its operations in order to accelerate innovation and growth and optimize business processes, particularly within its electronics and networked service businesses.

The reformation helped it to achieve approximately 80% of its targeted 330 billion yen of group-wide cost reductions for the fiscal year ending on March 31, 2010 in the first half of the year. Further, the company said that it is now positioned to launch a succession of competitive products from the end of this calendar year and into 2010.

The four turnaround initiatives include consistent profitability in core hardware businesses such as TV, game and digital imaging; provide new user experiences integrating innovative hardware, software and services; reach out to new customers and develop new geographic markets; and lift focus on environmentally conscious products and processes.

Sony said that it targets to regain the leading market position in LCD TV business. The company targets the LCD TV business to return to profitability in fiscal 2011 and achieve a 20% worldwide market share on a unit basis in fiscal 2013. The company also plans to create a new revenue model beyond conventional TV business models. Further, Sony expects to introduce "Evolving" TV that delivers new applications over the network and develop new generation displays using proprietary Sony devices.

Sony also said that its game business is targeted to return to profitability in fiscal 2011 on revenue increases by expanding hardware/software sales and enriching PlayStation Network services. The company also plans cost reduction and other measures to improve profitability in the business. Additionally, Sony intends to strengthen its digital imaging business through outstanding product differentiation and cost competitiveness based on key devices such as image sensors and imaging engines.

Further, the company stated that its networked service business will be expanded by utilizing PlayStation Network services and by integrating attractive hardware, including new mobile products and other consumer electronics, with networked services. The company projects annual revenues of 300 billion yen for the networked service business by the end of fiscal 2013.

As per the company, it plans to strengthen and expand networked mobile business, strengthen collaboration with Sony Ericsson Mobile Communications, a joint venture between Sony and Swedish telecom equipment maker LM Ericsson Telephone Co. (ERIC | Quote | Chart | News | PowerRating), accelerate the rollout of e-book business and expand the lineup of network-connected products. Installed user base is projected to be 350 million units by the end of full-year 2013.

Further, Sony targets to launch 3D-related products for the home, including TV, Blu-ray Disc players/recorders and 3D gaming on PlayStation 3 in fiscal 2011. The company will also provide solutions for 3D content production, distribution and theatrical projection to lead the field in broadcast and professional businesses. 3D-related products are expected to generated revenues of more than 1 trillion yen excluding content in fiscal 2013.

The company's growth strategies for lithium-ion battery business include securing high profitability in existing businesses and analyzing possible entry into new business domains such as storage/e-Vehicle battery.

Sony said that it will strengthen direct marketing strategies and continue to invest in emerging markets, including BRIC countries, to develop new customer bases. The company also aims absolute 30% reduction in greenhouse gas emissions from Sony Group sites in CO2 emissions by the end of fiscal 2016, compared to the level in fiscal 2001. Power consumption per product is targeted to reduce by 30% by the end of fiscal 2016, compared to the level in fiscal 2009. In addition, the company aims zero environmental footprint throughout the lifecycle of its products and business activities as long-term goal.

Reports said on November 18 that Sony Ericsson is trimming its presence in the U.S. by closing about six sites and shifting its headquarters to Atlanta from North Carolina's Research Triangle Park, leading to about 2,000 job cuts.

This action is seen as part of Sony Ericsson's global consolidation of product development operations, as well as the consolidation of its South American and North American business units. The company reportedly broke the news to its employees earlier in the day. Some Sony Ericsson employees are expected to be offered positions with the company at other sites, the reports stated.

For the recently closed second quarter, Sony reported a loss compared to a profit last year, reflecting 20% lower sales, losses of affiliated companies and higher restructuring charges. The company's net loss for the quarter attributable to stockholders was 26.31 billion yen or US$292 million, compared to a net income of 20.82 billion yen in the previous year. Loss per share was 26.22 yen or US$0.29, in comparison with earnings of 19.83 yen per share in the prior year. Sales and operating revenue dropped 19.8% to 1.66 trillion yen from 2.07 trillion yen in the same period last year.

The company, however, revised its fiscal 2010 forecast and now expects net loss attributable to stockholders of 95 billion yen, compared to 120 billion yen projected in July. Sony still anticipates sales and operating revenue to be 7.3 trillion yen for the fiscal year 2010.

SNE closed Wednesday's trading at $28.25, down $0.20, on a volume of 601,800 shares.

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