Sony Corp executives were aghast at a Tokyo news conference back in November as Chief Executive Nobuyuki Idei's attempt to show off a pre-paid card to make buying over the Internet easier flopped.
After downloading a short video clip of soccer highlights, Idei swiped the card over a computer-linked device to complete the purchase. Nothing happened.
While the card worked the second time, the glitch was yet another stumble for Sony as Idei tries to get the second-largest consumer-electronics maker back on track. With fewer new products on offer and losses mounting at its electronics business, investors are fleeing, sending Sony's shares tumbling 25 percent this year and shaving US$14 billion off its value.
"Sony had been a frontrunner by releasing products that are unique," said Hiroyoshi Nakagawa, chief investment officer at SG Yamaichi Asset Management Co, which manages US$19 billion in assets. "But the company's pace has slowed the past couple of years and it's losing its edge."
With Japan in its third recession in a decade and a slowdown pinching economies in Europe and the US at the same time, Sony is confronting one of its biggest challenges since its founding in the bombed-out ruins of post-war Tokyo, investors say. The fate of Sony, one of Japan's best-known companies and the nation's fourth largest by market value, may also say much about how the country's other industry leaders will cope.
Sony, which has twice slashed its earnings forecast this fiscal year, expects to eke out a profit of ?10 billion in the 12 months to March 31.
Analysts and investors are skeptical, saying the maker of the Sony Walkman may post a loss -- its first in seven years -- unless Sony can revive its money-losing consumer- electronics business.
Even the company's goal of linking its music players, video- game consoles and televisions to the Internet has been questioned by those unconvinced it will work. While Idei, Sony's chairman since June last year, has touted the benefits of high-speed networks for years, the company has been slow to demonstrate how the strategy will boost earnings, analysts say.
"Sony this year has been struggling to define itself as a provider of services in a networked society," said Masahiro Fukuda, who helps invest ?1 trillion in Japanese equities at DL-IBJ Asset Management Co.
Granted, Sony shares much of its woes with rivals around the world. The shares of Royal Philips Electronics NV, Europe's No. 1 consumer-electronics maker, have dipped 16 percent this year while the shares of Motorola Inc, the second-largest maker of mobile phones, have declined 27 percent. In Japan, Matsushita Electric Industrial Co, the largest consumer-electronics maker, has seen the value of its shares slide 38 percent.
Worldwide, electronics makers have been whacked by slower growth in demand for computer-related parts and chips.
Computer-chip sales fell by a third this year to US$152 billion, the industry's worst drop, Gartner Inc's Dataquest market-research unit says. Computer shipments may also fall for the first time since the industry's creation in the 1980s.
Still, investors and analysts say Idei and Sony's other top executives must share some of the blame for the company's performance. Under the most scrutiny is President Kunitake Ando, who headed Sony's electronics unit between 1997 and June 2000.
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