While some may seem all too happy to spell failure for Sony prematurely, a closer look at the company’s financial trend reveals quite the opposite. Is there really cause for concern with the way things are going? Let’s take a look at Sony’s financial trajectory.
Last quarter Sony saw an increase in revenue of 2 percent and technically had a net profit of $252 million, but due to flux in tax rates globally resulted in a $198 million net loss. It was still a significant improvement from the same quarter previous year where the company reported a net loss of $350 million. The PlayStation division also posted a small profit which was an improvement over the previous quarter.
As analysts have pointed out, Sony’s finances have been moving in the right direction as seen over the past few quarters, with many, including Sony predicting a modest $233 million profit for the quarter ending in March.
Kaz Hirai recently told reporters this month that under his leadership which started nine months ago, Sony has become much more nimble and focused. He admitted that over the past four years the company had gotten “bogged down” in its intricate bureaucracy and assured everyone that he is personally getting involved in product development so good ideas don’t get lost.
I’m shepherding several of those projects personally myself to make sure that it doesn’t get held up in the bureaucracy, or it doesn’t suddenly fade away in the approval process.
He also highlighted Sony’s charge towards the next trend in technology with 4K and OLED TVs, where the company is the only major player close to offering both technologies together for mass production currently. Hirai also reiterated his commitment to pushing the PlayStation brand as one of its major pillars at Sony, which is clearly a good thing for gamers. Out of all of the console manufacturers, Sony currently holds the most number of high profile studios under the Sony Computer Entertainment umbrella.
Sony Pictures also had a fantastic year in 2012, taking the number 1 spot globally beating out Warner Bros and Fox by a significant margin. The company has reportedly generated over $4.4 billion in movie ticket revenue alone in 2012 and this isn’t even counting Sony’s television networks.
Sony’s major earner was Skyfall which earned over $1 billion in revenue with The Amazing Spider-Man next, which earned close to $800 million and followed by MIB 3, which grossed $624 million.
Sony actually makes quite a bit of money as its revenue was around $80 billion last year surpassing that of Microsoft and Google. What Hirai is focused on doing is cutting the fat so that non-profitable businesses don’t drag down the profitable ones such as Sony Pictures.
Sony in many ways reminds me of a past employer when I worked for an insurance company. The company was quite successful and since it was a non-profit organization the executives had less incentive to remain lean and aimed to spend as much to maintain razor thin profit margins. The company ended up “staffing for success” where unnecessary spending occurred for the sake of convenience and the illusion of future growth. However, when the economy experienced a downturn, that razor thin profit margin struck back, undoing many of the successes achieved during its golden era.
Similarly, Sony has become a sprawling empire with arms in various industries and is staffed for success from its golden era. If you think about it, there is no other company worldwide that even comes close to the level of diversification Sony has achieved. However, maintaining such breadth requires laser focus and strong leadership at each vertical.
While former Sony CEO, Sir Howard Stringer failed to make the necessary changes, possibly due to lack of political clout, it appears Hirai is able to do so.