Sony President Kunitake Ando said on Friday its products are selling “extremely well” during the Christmas shopping season, powered by DVD recorder demand at home and sales of large-screen televisions in the United States.
THE ALL-IMPORTANT October-December quarter accounts for about one-third of Sony Corp’s annual revenues and a majority of its operating profits, due to a boost in sales during the few months before Christmas.
“There is an expectation that Sony is always a laggard these days, so we’re sorry to disappoint,” Ando, 61, said with a chuckle during an interview with Reuters, noting that digital cameras, flat televisions and DVD recorders were selling well.
“There is double-digit growth in the U.S., and Europe is a little better than last year. All other regions, such as East Asia, pan-Asia, the Middle East and South America, are seeing double-digit growth.”
The bullish comments from Ando contrast with the doom and gloom of the company’s year thus far, from the “Sony shock” — a $1 billion quarterly loss announced in April — to restructuring announced in October that calls for a 13 percent cut in its global work force in the next three years.
“This is a good chance. If we didn’t go through something like this, we wouldn’t be able to have a transformation” said Ando at Sony’s Tokyo headquarters.
“Basically we have high-cost operations in a high-cost country, and if we can become highly efficient such as firms in Europe and North America then we can have profit margins comparable to them.”
Sony aims to reach an operating profit margin of 10 percent and slash annual fixed costs by 330 billion yen ($3.05 billion) by 2006/07. Price competition with more cost-efficient rivals and mounting inventory pushed its margin down to 2.5 percent in the 2002/03 business year, which ended in March.
RIVALS AT THE GATE
It must fend off low-cost Asian rivals in its key North American market, which accounts for one-third of its sales, but Ando said it has no intention of engaging such companies in price competition.
“America is a price-sensitive market, and if you lower prices things will sell well, but the high-end products also sell very well,” said Ando. “We’d like to stay in the areas where you can take a healthy profit.”
Healthy profits may be hard to find with personal computer giants Dell Inc, Hewlett-Packard, Gateway and Apple Computer all encroaching on Sony’s turf with various digital music players and flat-panel TVs.
One product those rivals do not make is DVD recorders, a market that Sony entered only in November with a lineup called “sugoroku,” which roughly translates as “great recording.”
“All of a sudden, our share in the DVD recorder market has surged from one percent to 20 percent,” said Ando at Sony’s Tokyo headquarters.
Sony has been slow to enter the DVD recorder market, lagging behind leaders Matsushita Electric Industrial Co Ltd and Pioneer Corp, which said last month that it expects overseas demand to take off in 2004.
The Japan Electronics and Information Technology Industries Association (JEITA) said DVD recorder shipments tripled from January to October compared with the same period last year.
Another product area Sony has been slow in moving towards has been liquid crystal display (LCD) televisions.
In October, it signed a memorandum of understanding to form a $2 billion joint venture to make flat screens for televisions with rival Samsung Electronics Co Ltd of South Korea, to ensure a steady supply of LCD panels.
Ando said final details of the LCD joint venture will be announced in February, with the investment to be split almost evenly between the two firms. Full production at the venture is expected to begin in mid-2005.
Samsung will have one more share in the venture than Sony so as to speed up decision-making, since the operations will not be based in Japan and the venture’s chief executive will come from the South Korean electronics conglomerate, Ando said.
Prior to the interview, Sony shares closed down 0.54 percent at 3,690 yen on Friday, compared with a 1.09 percent decline in the Tokyo market’s electric machinery sub-index IELEC.The stock is down 26 percent in the year to date.
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