COMPANIES - INTERNATIONAL: Sony says it made mistakes in TV unit
Financial Times UK, London Ed2, Sec. COMPANIES - INTERNATIONAL, p 30 (10-29-2007)
By MARIKO SANCHANTA
Sony's chief financial officer has admitted mistakes were made in its key television division, which analysts fear could be further hit if US consumers buy fewer large TVs during the end-of-year shopping season.
The admission comes as Sony battles with Samsung and Sharp for supremacy in the flat-panel TV market.
Analysts and competitors say US sales of larger liquid crystal display TVs in the US could slow in the coming months as a result of the global credit squeeze.
Highlighting the worsening US trading conditions, Mikio Katayama, president of Sharp, the world's third-leading LCD TV maker, said last week: "Sales of 40in or larger products have nosedived since July in the US".
"Competition has been very severe and more severe price competition could come," said Nobuyuki Oneda, Sony's CFO, in an interview with the Financial Times.
"Our line-up of LCD TVs in the spring was not so competitive and we did not have sufficient product lines of full high-definition TVs."
Sony's television division lost Y21bn (Dollars 184m) from July to the end of September, more than double the loss in the same period last year. The next few months in the US are crucial as TV sales are the biggest single contributor to Sony's revenues, according to Macquarie Securities.
Poor performance at Sony's TV and games divisions could wipe out any benefits from attempts to restructure the company by Sir Howard Stringer, Sony's chief executive.
However, Sony is on track to achieve a 5 per cent operating margin in the year ending March 2008, a target that was established by Sir Howard. Mr Oneda also said that Sony missed the mark with its rear-projection TVs, a cheaper alternative to plasma and LCD sets, in the US.
"In the US, the rear projection TV share was 28-30 per cent, and last year it was less than 20 per cent because of a (pricing) attack from plasma TVs," he said.
"The price reduction was so drastic that we couldn't anticipate it. We lost big market share and the market is shrinking . . . and we started to lose money very quickly."
Sony is trying to boost sales of its PlayStation 3 games console in the last three months of the year by launching a new model and cutting prices of others. "Our target is still 11m (PS3 sales by March 2008) but we have to be cautious about it," said Mr Oneda.
By shrinking the powerful "Cell" chip - the brains behind the PS3 and its most expensive component - and reducing the size of the graphics chip, Mr Oneda said Sony should be able to cut production costs for the PS3 by one-third next year.
Sony says its lossmaking games division should be profitable again by the start of the new financial year in April.