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Sony: new growth plan to increase profits 25-fold

Feb 18, 2015, 11:14 AM EST
Japan's electronics giant Sony president Kazuo Hirai speaks at a press conference to announce the company's new business strategy, at the company's headquarters in Tokyo on February 18, 2015.
YOSHIKAZU TSUNO/AFP/Getty Images

Sony unveiled a new growth plan that aims to increase its profits 25 times over by 2018 as it restructures and consolidates its reach. CEO Kazuo Hirai said on Wednesday the Japanese consumer electronics firm would no longer pursue sales growth in areas such as smartphones where it has suffered competition from cheaper Asian rivals as well as industry leaders like Apple Inc and Samsung Electronics, writes Reuters. Sony would instead focus its spending on more profitable businesses such as camera sensors, video games and entertainment as it seeks to return to growth after forecasting for this financial year its sixth net loss in seven years. Sony is in the midst of a restructuring that has so far seen it sell off its personal computer division and spin off the TV business. It has also axed thousands of jobs. Sony shares have risen more than 80 percent over the past year as investors applauded the restructuring, which accelerated since Hirai appointed Kenichiro Yoshida as his chief strategy officer in late 2013.

The Wall Street Journal reports that after years of losses, Sony now aims to achieve operating profit of ¥500 billion ($4.2 billion) in three years. It expects to eke out an operating profit in the year ending in March, with the TV business turning to the black for the first time in a decade. Mr. Hirai said Wednesday that he envisioned spinoffs of other units. He also said the company would consider a sale of the TV business or the company’s struggling smartphone arm, though he said nothing was currently in the works. Mr. Hirai, in a briefing on the company’s midterm strategy, focused more on profitability goals than grand visions of Sony’s future. The company, he said, wants to achieve a 10% return on equity, a broad measure of profitability, up from minus 7.4% for the year ending March 31.

Rather than pursuing sales volume, Mr. Hirai said, Sony will focus on growth in profitable areas such as the PlayStation game business and the image sensor unit, which makes cameras for Apple Inc. and other smartphone providers. It sees growing demand for the sensors in cars because of the spread of autonomous driving technology. Sony also sees its music division and its movie unit as growth drivers, even though the latter is still recovering from a recent cyberattack. Mr. Hirai said the company would consider acquisitions of entertainment assets in places such as India.

“Even more important than the numerical targets is that the company’s transformation from the Sony of yesterday continues apace,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, according to Bloomberg. “They should sell the TV and mobile phone operations and focus on businesses that can make the most of the strengths they have in devices and entertainment content.” The forecast is 25 times the size of the 20 billion yen operating profit Sony is projecting for this year.

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