Consumer electronics giant Sony is expected to unveil its new
corporate strategy tomorrow in the hopes of breathing new life into the company's once red-hot shares.
Sony senior executives, including chairman Norio Ohga and president Noboyuki
Idei, are expected to explain the company's strategy and future plans tomorrow in Tokyo. The
company may also discuss its earnings forecast for the coming months.
Topping the agenda for investors will be plans for the company's new gaming device, the PlayStation2, and the company's overall plans for Internet-related business.
On the New York Stock Exchange, Sony has surged from less than $90 last June to
more than $300 in February. But shares pulled back rather sharply this month.
In late trading today, Sony gained $9.25 to $256.06.
Jeff Pittsburgh, who covers Sony for Pittsburgh Institutional, views the
recent dip as a buying opportunity and expects Sony's announcement to focus
on the company's Internet plans.
Some of the recent slide in the shares can be attributed to a pending
2-for-1 stock split, said Pittsburgh.
Because of the split, which becomes effective May 19, institutional
investors were practically forced to sell some shares to keep Sony from
dwarfing the other holdings in their portfolio.
In addition, the stock surged as PlayStation2 neared its debut early this
month. Once the gaming machine hit the market, some investors decided to
sell shares, said Suzanne Betts, senior analyst with Pittsburgh
Well known for its Trinitron TVs, Walkman audio players and the Vaio line
of PCs, Sony has been trying to also position itself as an Internet company.
"The drivers for this stock have been the PlayStation and the Internet,"
Pittsburgh said. "Although Sony's chairman put a value on the company of
$200 a share when the stock was running up two months ago, I have a 12-month
target of $400."
Others aren't so sure.
"It's nonsense to buy Sony as an Internet-oriented company unless the
company generates profits of several hundred billion yen out of this
business,'' Hideki Watanabe, an analyst at HSBC Securities Japan, told
Bloomberg News. He rates Sony a "hold."
To further align itself as an Internet company, Sony plans to form an
Internet bank next year. Bloomberg reported that Sakura Bank, Japan's
fifth-largest bank, is in talks with Sony to seek additional partners and
may take up to a 20 percent stake in the venture.
"Sony is expected to disclose progress in its various operations which it
has already announced, such as the details of its Net-banking operations,"
said Masahiro Ono, an analyst at Warburg Dillon Read. "Investors know which
way the company will go from here. Now they need to know which operations
will contribute to earnings, by how much and in what time frame."
Tomorrow's strategy talk follows a restructuring of Sony Electronics of
America that was announced earlier this month. At
that time, Sony said it hoped to be able to move more quickly to capture new
markets that result from its transformation to a "broadband entertainment
at a glance
CEO: Norio Ohga
Pres.: Nobuyuki Idei
Market value: $114 B
52-week low: $73.13
52-week high: $314.75
Exchange: NYSE (ADRs)
"="" rel="nofollow" class="c-regularLink" target="_blank">Bloomberg (03/29/00)
The company also noted it's making more moves
to sell consumer electronics
Meanwhile, Sony last year announced it will create a new line of handheld devices that go beyond the
organizer functions associated with today's Palm devices. The new handhelds
will have audio-visual capabilities and will focus on providing wireless
communications, Sony said.
Analysts see these devices as another platform for e-commerce services, such
as stock trading and movie ticket purchases, in addition to the revenue from
wireless access services and advertising.
The company will sell 3 million cable set-top
boxes to Cablevision of New York and will introduce its
PlayStation2 game console in the U.S. next year, both of which could
enable the kinds of e-commerce services Sony is offering in Japan.
Sony Communication Network, the company's Internet unit, earlier this month
announced plans to team with a Japanese discount travel agency to create a
Web site where airline tickets and vacation packages could be purchased
Meanwhile, Sony has also been making moves to increase its subscriber base
for So-net, a Japanese Internet service provider that currently reaches 1.2 million
"Sony has recently been making all its products to be Net applicable,"
Pittsburgh said. "With their Internet efforts, some analysts and I feel
their stock will trade in the $400 range."
He added that sales for the PlayStation2, a video game console that hit the
Japanese markets earlier this month, are expected to do especially well in
the second half of the year, as the holiday season kicks in.
When the PlayStation2 was released in Japan, it sold nearly
720,000 units in the first three days. But in the wake of the debut, news of
some embarrassing glitches arose.
First, there were defects
in some PlayStation memory cards reported by customers, which gave rise to
about a recall, although no recall has been issued to date.
A second, potentially costly, glitch allowed the device to be manipulated to play digital
video disc (DVD) software sold overseas. The particular device manipulation presents a technical violation of an
agreement among DVD player makers that lets machines only play discs sold in
the same country as the DVD player. The problem opens Sony up to potential
legal trouble, although no lawsuits have been forthcoming, presumably
because Sony is moving to correct the problem.
Sony's moves extend beyond Internet services. Philips, another consumer
electronics powerhouse, and Sony said today they were forming an
independent chip design company called TriMedia technologies, and both have
a tentative agreement to be among the first to invest in the entity.
Taking technology already developed by Philips, the plan calls for the new
company to create and license new processors and software for new
consumer products such as personal video recorders, video editors, home
networking devices, security and surveillance systems, as well as digital
televisions and advanced set-top boxes. The pair expect other consumer
electronics companies to invest, as well.