It comes as no surprise that Sony is heavily restructuring the firm’s makeup after they received a downgrade from Moody’s Japan. As anyone in business knows, these moves were already well in motion before Moody’s downgrade of Sony’s credit status came down to Junk levels. Sony has been slowly and quietly reinventing themselves and the news as of late has indicated that Sony is less interested in making money on hardware. Their focus is to deliver profitable content on their own hardware in order to drive profitability and to make both desirable.
This was first signaled by the rumor that Sony would be selling their VAIO PC division, which has now come out to be a true rumor as they are in fact selling it to Japan Industrial Partners. This move addresses one of the concerns listed in the Moody’s report that resulted in a downgrade of Sony’s credit rating. The real truth is that Sony’s new strategy does not include the PC, but rather focuses more squarely on smartphones, tablets and TVs. These are considered to be much heavier media consumption devices and fit well into Sony’s new vision for the company.
Sony’s new vision can also be seen in the fact that they are also transitioning away from the eReader business as well and moving over to Kobo’s platform. They will also be placing Kobo’s platform on their smartphones and tablets for consumers to have easy access to books. The real truth is that Sony is making the right decision here because ultimately eReaders have been dominated by Amazon and their vast eBook library. Anyone else that doesn’t own a Kindle eReader is using a tablet as their eReader and is more than happy with the experience. As such, most eReaders are effectively rendered redundant and end up costing the companies that make them more money than anything else.
They also announced a restructuring of their TV business, which will find them reducing their costs and strengthening their position as leaders in 4K, as we had said they should do. They also said that they are going to look for ways to improve the manufacturing efficiency of their LCD panels in order to improve their margins and make their products more attractive. This is likely due to the fact that Samsung and Chinese TV manufacturers having taken the world by storm and all of the traditional Japanese TV makers; Sharp, Panasonic, Sony and Toshiba are feeling the pinch. I think Sony’s best play here would be to use their power of content to harness their TV and tablet positions as the leading entertainment devices, which they currently aren’t.
Sony is one of the few companies that is in the unique position to do so and it looks like their strategy to focus on entertainment on the PlayStation 4 was the right one. Sony didn’t try to go wild with TV integration like Microsoft did and they focused on gaming and the social aspects of gaming, and now they’re outselling Microsoft by huge margins. Sony built a device that was more affordable, faster, sleeker, and did exactly what their target market wanted it to, now they just need to refocus their efforts on their TV business as their mobile offerings are already quite good but lack the marketing to make consumers aware of that fact.