Tuesday, November 22, 2011

The Problem with Sony

There was a decent article on Sony in Businessweek this week (read here). 

As I said before in another post, Sony is a company/stock that I would love to love.  I grew up with the brand and I think it still has a very strong presence in Japan and globally and does have strong brand value even though that seems to be eroding every year.

That's why I keep an eye on Sony and will keep watching it (maybe I will read their annual reports every year for fifty years and then finally buy some stock decades from now).  It also is a good window into corporate Japan because what ails Sony is not industry specific but more Japan culture specific.

The article lays out pretty well what has gone wrong at Sony over that past couple of decades.  I have no idea if they will recover or not and if I will ever buy their stock.

But there are some things that still bother me about it that keeps me away.  Actually, the fact that Sony is on the front cover of Businessweek with a negative headline ("What is Sony Now?") is a big BUY signal (the contrarian front page indicator).

The problem is how little progress Sony seems to be making even with a foreign CEO.  You would think things would change, but I guess Stringer is way too respectful of his collegues in Japan that he can't take drastic action.  What Sony needs, really, is a Lou Gerstner-like character (this name popped up in my mind because I just finished reading all of IBM's annual reports from 1994; fascinating reading).

Anyway, here's a a little snip from the Businessweek article that really shows what is wrong with corporate Japan.  I nearly fell out of my chair when I read this:

Stringer can't sell or dump the TV business because it's the Sony legacy?  Because everybody at Sony is very proud of the hardware they create?  Clearly, Stringer has been Japan-ized more than Sony has been Westernized.  Stringer doesn't want to hurt anyone's feelings.  Sigh.

A comment like that from a U.S. corporate CEO would be shocking.

I can imagine the internal lobbying, screaming, yelling and crying that must have happened when IBM decided to sell it's PC business (smart move).  I can also imagine what it must have been like with a hurricane of internal emails when GE tried to sell it's light bulb and appliance businesses.

You can't run a corporation on pride of past accomplishments.  Can you imagine where Intel would be today if they didn't decide to exit the commodity memory chip business?  

This is the sort of thing that really destroys corporate value.  I think CEOs and managers feel that they are doing the right thing for the long haul by not rocking the boat and preserving the legacy and protecting the 'pride' of employees but if there is no change when the world is changing the endgame is ultimate failure/bankruptcy.    It does nobody any good in the end to take the easy course and try to keep everyone happy (which is what it seems like Stringer is trying to do).

I used to be excited that Kazuo Hirai might become the next Sony CEO (Japanese executive with substantial overseas experience), but now I'm not so sure.  I think Sony really needs someone like Gerstner; someone from the outside with no emotional baggage and no internal political considerations.

Unfortunately, that is highly unlikely.

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