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Wed, May 28, 2003 - Page 12 News List

Sony investors expected to grill Idei over plans

BUSINESS STRATEGY Analysts say company chairman Nobuyuki Idea will have provide specifics today on how he is going to boost profits by focusing on Internet products

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Sony Corp chairman Nobuyuki Idei has often championed his vision of using high-speed Internet to bring the company's movies, music and games to its television sets. Now, investors want to know how he'll turn his plans into profit.

Idei meets with investors today in Tokyo to lay out his strategy for the world's No. 2 consumer electronics maker, which last month posted a loss for the fourth quarter to March 31 of Japanese Yen 111.1 billion (US$927 million), almost triple some analysts' expectations. The loss pushed its shares to a seven-and-a-half-year low.

Idei will need to present specifics on products and technologies to meet the company's goal of boosting profit margins by more than four times to 10 percent by 2006 to win back investors' confidence.

"Investors won't be happy with just talk based on vague business ideas anymore," said Hisashi Sue-oka, who helps invest about US$21 billion at SG Yamaichi Asset Management Co.

"It's difficult for Sony to regain investors' faith with just an extended version of its old business strategy," he said.

Idei has long talked of using the Internet to marry Sony's electronics products -- TV sets, computers, music systems and gaming machines -- with its content: movie hits such as Spiderman and Men in Black II, music artists like Jennifer Lopez and Dixie Chicks and games including ``Final Fantasy XI.''

In the next three years, Sony will spend Japanese Yen 1 trillion (US$8.5 billion) to develop products for high-speed Internet services.

The investment will also go to develop chips and technologies to enhance the online distribution of its entertainment products.

"The problem with Sony is that they are not investing in creating their own major hit products," said Yasuteru Miyamoto, who helps manage about US$2.5 billion at Oechsle International Advisors in Tokyo.

"Sony's position in developing key technology is less competitive," Miyamoto said.

Sony shares, which are down 40 percent this year, fell Japanese Yen 60, or 2 percent, to Japanese Yen 3,000 on the Tokyo stock exchange yesterday.

Sony, which has one of the world's best-known brands, was at the epicenter of Japan's post-World War II economy. Its technological savvy and hip gadgets, from the Sony Walkman to the PlayStation 2, helped shape Japan's image as a hotbed of innovation.

It is now struggling to transform itself from a consumer electronics maker into a media and network giant.

"Sony's not in a satisfying business condition at all right now and we have to start a full-scale overhaul," Idei said last month.

Rivals such as Matsushita Electric Industrial Co and Sharp Corp have boosted earnings with stand-alone products such as flat-panel TVs and DVD players and recorders.

Matsushita Electric, the world's No. 1 consumer electronics maker, turned to profit in the year ended March 31 and forecast an 18.5 percent rise in operating profit for the year to next March.

Profit at Sharp, Japan's largest maker of liquid-crystal displays, tripled in the fiscal year just ended. It projected a more than 50 percent increase in profit this year.

In contrast, Sony, has forecast a weaker-than-expected ?130 billion operating profit for the year to March.

"The direction of Sony's business strategy is right, but the company has jumped way before it was supposed to," said Hitoshi Kuriyama, an analyst with Merrill Lynch Securities.

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