In a year that could have been a banner one, entertainment giant Sony is warning investors to expect a big drop in net profits from its earlier July forecast. The drop, according to a report in The Globe And Mail, is a full 38 percent thanks to the battery recall and price cuts it plans to offer in Japan for the PlayStation 3. The hard numbers fall in at 80 billion yen, or $673-million (U.S.), for the fiscal year through March 2007. Earlier projections had been at 130 billion yen.
Fitch Ratings analyst Tatsuya Mizuno has been quoted as saying the troubles at Sony are far from superficial. “The battery problem is not a simple one-time problem for Sony because it hurts the company's reliability as a supplier in its core electronics sector,” Mr. Mizuno said.
The price cuts for Japan and the delay in global launch for the PlayStation 3 are also begin blamed for the poor forecast.
What this all amounts to is Sony’s failure to thrive following massive diversification. Rather than stick to a few key products, the company has gone out on a proverbial limb in a big way and is struggling as a result. With everything from movies and games to consoles and televisions now made by the company, Sony’s lost sight of what it does best, and that’s make electronics.
With a focus divided, the company’s mainstay business is hurting and taking public relations hits left and right. It's not delivering on promises, and its word is starting to mean less and less.
If any company can pull out of this, Sony can. But, it will take honesty, not ego. It will take streamlining, not hype.
The question isn’t whether Sony can fix the image of its electronics division; it’s whether Sony is willing to?
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