Sony head sees big things for 3-D

Technology to generate next $10 billion business: Stringer

by Mariko Yasu and Maki Shiraki

Bloomberg

Sony Corp. Chairman Howard Stringer forecast 3-D movies, pictures and games will be the electronics maker’s next $10 billion business, challenging investors and analysts who say the technology isn’t ready to become mainstream.

The maker of Bravia televisions and PlayStation 3 game consoles said Thursday 3-D-related products, excluding content, will generate more than ¥1 trillion in the 12 months ending in March 2013. The Tokyo-based company will begin offering TVs, Blu-ray players and game consoles that adopt the technology starting next fiscal year, it said.

Stringer’s bet that 3-D will spread from the movie theater to the living room highlights part of his strategy to revive a company that’s forecasting its first back-to-back annual losses in half a century. The move may signal a shift in focus as the Welsh-born executive nears his target of cutting ¥330 billion in costs by eliminating 20,000 jobs and shutting 10 factories.

“I doubt 3-D will become a hit,” said Naoki Fujiwara, who helps oversee $4 billion as chief fund manager at Shinkin Asset Management Co. in Tokyo. “Investors want to see how the company will make money.”

Stringer also plans to drive sales growth by offering electronic-book readers and an online service that can be accessed from Sony’s TVs, music players, game machines and other mobile products, a business the company projects will generate ¥300 billion in the year ending in March 2013.

The company plans to invest ¥100 billion to research and develop lithium-ion batteries, including those used for electric cars, said Hiroshi Yoshioka, head of the consumer products and devices division.

Sony is not alone in pushing 3-D. Osaka-based Panasonic Corp. and Tokyo-based Toshiba Corp. also aim to introduce 3-D TVs by as early as next year as Japanese electronics makers seek to compete against South Korea’s Samsung Electronics Co. and LG Electronics Inc.

Kyung-Soo Ahn, the executive vice president in charge of Sony’s business products unit, said this week sales of projectors, cameras and other equipment capable of producing 3-D images are expanding faster than expected. Sony received orders for more than 11,000 3-D projectors in the U.S. as movie-theater companies, including Regal Entertainment Group and AMC Entertainment Holdings Inc., adopt the technology, the company said.

Stringer, 67, said Sony’s reach in the entertainment industry puts the company in position to lead the 3-D market. The company’s movie unit, producer of “2012″ and “Michael Jackson’s This Is It,” is Hollywood’s third-largest studio, generating $1.3 billion in ticket sales this year through Nov. 15, according to researcher Box Office Mojo.

“Sony is the only company with end-to-end filming production, 3-D conversion, home delivery and home display of 3-D content,” Stringer said in a briefing in Tokyo Thursday.

“This is another example of how the breadth of Sony’s operations give us a significant advantage versus the competition.”

While Sony hasn’t disclosed prices of its 3-D TV models, Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co., said such sets will probably be too expensive initially to attract a mass audience.

“These 3-D products will no doubt be pricier and it will take years for them to penetrate the market,” said Nakanishi. “Sony often makes bold statements to shore up its share price and I see its 3-D plan as being one of those announcements.”

Not all analysts are skeptical. Because its operations span from hardware to content, Sony will be able to expand 3-D related products without “huge” investments, said Yoshiharu Izumi, an analyst at JPMorgan Chase & Co. in Tokyo.

“It may not be so hard for the company to attain the ¥1 trillion goal,” Izumi said.

The company is projecting sales to fall 5.6 percent this fiscal year as Sony seeks to weather the global recession, which led the company to cut jobs, shut plants, outsource production and reduce its number of suppliers.

Sony pushed back Thursday its key profitability targets — a 10 percent return on equity and a 5 percent operating margin — by two years to the 12 months ending in March 2013. The company is forecasting a net loss of ¥95 billion this fiscal year after losing ¥98.9 billion the previous year.

The company had an average of return on equity of 4.4 percent in the five years that ended in March 2008, according to data compiled by Bloomberg. That compares with Samsung’s 19 percent and Panasonic’s 1.4 percent, according to the data.

“Before dreaming about 3-D, the company needs to achieve real profits,” said Masahiro Mitsui, a Tokyo-based investment analyst at Federated Advisory Services Co. “The technology requires users to wear specialty glasses and it may work with games, but not for sports and documentaries.”

Online gadget plan

BLOOMBERG

Sony Corp. plans to start new online services that can be accessed from its products by the end of 2010, an executive said.

The Tokyo-based maker of Bravia televisions will start the online service for downloading games and movies “perhaps not with all of our devices at the same time,” Kazuo Hirai, head of Sony’s Networked Products and Services division, told reporters Friday.

Sony aims to boost offerings of software content to its hardware users as it seeks new revenue sources after competition with rivals including Samsung Electronics Co. intensified in the global TV market. The company is targeting over ¥300 billion in revenue from online services in the year ending in March 2013.

The company has “a lot of confidence” about the sales target and succeeding in the online business after it tripled its annual revenue from similar services to PlayStation users, Hirai said. Sony estimates such revenue will grow to ¥50 billion in the year ending next March, the firm said Thursday.

Sony plans to cut the cost of making PS3 consoles by 15 percent next fiscal year by reducing the number of components and shrinking processors, Hirai said Thursday. Sony will also improve operational efficiencies of the game unit to restore its profitability by March 2011, the company said.