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Tuesday, November 01, 2005

Stringer banking on HD strategy for Sony rebound

Stringer banking on HD strategy for Sony rebound

"Eight months after being crowned Sony Corp.'s new warrior king, Howard Stringer is preparing to do battle with upstart rivals like Apple's iPod using an arsenal of new Blu-ray-enabled, high-definition portable and interactive devices and a marketing blitz designed to reinforce Sony's primacy in the next-generation media marketplace.

Clearly, Sony is banking on its much-anticipated PlayStation 3 to be the digital Trojan horse that will allow the company to triumph in the emerging world of personalized, interactive, multimedia products and services.

Stringer, the first non-Japanese chairman and CEO of Sony, already has scored a major victory in making its Blu-ray Disc next-generation DVD technology the de facto industry standard by enlisting the support of five of Hollywood's six major studios. The ultrafast super CELL microprocessor Sony helped create also will drive a spectrum of HD products -- from cutting-edge LCD television sets to HD camcorders and musical cell phones to the relaunched Walkman -- that are Sony's most potent weapons.

"We have an HD value chain that no one else in the business has," Stringer reflected during his first extensive sit-down interview since announcing Sony's restructuring in late September.

"Nobody talks about convergence anymore because it is a day-to-day reality," Stringer said on a recent Friday afternoon in his New York office. "We're living it, whether it is (PlayStation Portable) or phones or Walkmans or iPods. They are all finding new ways to deliver content."

In a demonstration of the swift collaborative response to consumer-driven marketplace changes that a revitalized Sony can deliver, the company soon will unveil a line of compact, portable video devices to fill the time gap before PlayStation 3 launches in Japan in March and in the U.S. a year from now.

Unlike the PlayStation Portable, which has been elevated to a benchmark multimedia player with numerous upgrades since its launch eight months ago, these new, smaller devices will focus primarily on video and transferring user-selected content from digital video recorders and other devices using Sony Memory Sticks, direct downloads and preloaded fare. Sony's plans are still being developed under tight secrecy, but it is clear that the company's hope is to remind consumers that Sony already is active in the spaces where Apple wants to go with the video iPod.

Stringer believes the company's electronics expertise and aggressive, expansive content holdings uniquely position Japan's largest global icon at a time when technological standards and formats are being sorted out in Darwinian fashion in a marketplace where the clout of the individual consumer never has been greater.

"The company is worth fighting for," said Stringer, who describes himself "a Sony warrior" to investors dismayed by Sony's lagging stock price and $90 million in projected losses this fiscal year, compared with the $90 million in profits previously forecast.

The vital war plan is being executed by Stringer just a month after he unveiled a three-year restructuring plan that will eliminate $2 billion in costs, 10,000 jobs and the structural "silos" that have made the Japanese giant as insular as the country in which it is headquartered.

Sony's array of hardware and software products is creating a new "high-definition value chain that starts with cameras and goes through projectors and television sets and ends up with the PS3. You can see an HD necklace with all the pearls connected," Stringer said.

"Owning the content as we do is all of a sudden part of an integrated relationship with the device. Each understands the value of the other. And that is what makes Sony so unique, since we make them both," Stringer said. "More and more, you will see Sony's fully integrated HD strategy."

That dual advantage is why the company is in talks with major players including Comcast Corp. (an equity investor in Sony's recent acquisition of MGM), Yahoo!, Google and others about alliances involving services such as search, content licensing and the creation of niche content platforms.

If anyone has got the people skills and the strategic sense to pull it off, it is Sir Howard, as the 63-year-old Welsh-born executive is known affectionately throughout Sony. (He was knighted by Queen Elizabeth II in 1999.) Stringer made his mark as president of CBS News and later CBS Corp. before he joined Sony Corp. of America in 1997 as head of operations.

Although he is a U.S. citizen, Stringer makes his home in Oxfordshire, England, with his wife and two children. But he spends most of his time traveling every other week between New York and Sony's Tokyo headquarters. Stringer is quick to show Japanese-style reverence to Sony founders Masaru Ibuka and Akio Morita by telling investors and shareholders that one of Sony's new goals is to "reclaim the primacy of our brand and the fighting Sony Spirit of Ibuka-san and Morita-san."

The undervalue of Sony electronics and the Sony brand in general is underscored by the fact that the company's current $36 billion market capitalization largely reflects Sony Entertainment (at more than $10 billion) and the PlayStation business (valued at about $20 billion), analysts said. Still, Sony's Japan-based electronics business contributes nearly three-quarters of the corporation's total $65 billion in revenue.

Stringer has made his mark in Tokyo in a short time, Sony insiders say, by becoming a part of his own team. He promptly moved his executive office at the company headquarters there from the seventh floor to the sixth floor, where he can freely walk the halls and converse with staff. Monthly huddles with next-generation executives keep new ideas flowing and the lines of communication open, and Stringer has placed well-regarded veteran electronics engineers in key posts to execute his plans.

Despite the language and cultural barriers, many of Sony's 160,000 employees have embraced the restructuring plan Stringer and Sony president and electronics CEO Ryoji Chubachi presented in September as radical moves long overdue: tearing down internal silos, fostering horizontal communications and establishing a significant level of goal-tracking and milestone-setting. Software and hardware development now occur simultaneously. These were not goals in two other failed restructuring efforts under his predecessor, Nobuyuki Idei, who stepped down in June.

"Howard is very approachable. He doesn't have airs about him. Even though he is a knight, you don't have to bow or curtsy in front of him," one high-level Sony executive remarked. "There used to be a lot of ceremony with the CEO position at Sony. There's not that much any more, but there is respect."" [more]

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