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 Institutional.
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 company."
|Sony 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)
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 online.
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 users.
"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 worries 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.