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Sony’s Turnaround Efforts Unlikely to Shake Korean Players
Struggling Sony
Sony’s Turnaround Efforts Unlikely to Shake Korean Players
  • By matthew
  • February 7, 2014, 09:48
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SEOUL, Feb. 7 (Yonhap) -- Sony Corp., the once unchallenged electronics industry leader, announced dramatic measures to turn itself around and be counted again, making South Korean tech players listen in but not with much alarm.

Market watchers on Friday pointed to the robust presence of South Korean firms in the global market across the board in businesses that Sony concentrates on.

“Sony’s efforts will have only a limited impact on South Korean players' market share in TVs, as the move (of splitting its TV business) is intended to improve its financial health by cutting off loss-making sectors,” said Song Myung-sup, a researcher at HI Investment & Securities Co.

Sony sounded out an expected earnings shock, saying it was estimating a net loss of 110 billion yen (US$1.08 billion) for fiscal 2013 ending March 31. The preliminary figure marks a sharp backtrack from a net profit of 30 billion yen estimated earlier.

The Japanese firm attributed the grim outlook to its dull TV and PC business, with its mobile sector also remaining sluggish.

Sony said it plans to sell off its VAIO PC business, which was launched in 1996, adding it will also spin off its TV division as an affiliate by July in a bid to focus on its mainstay business such as smartphones and tablet devices.

The company said it will cut some 5,000 workers around the globe, including 1,500 from home turf, in line with its belt-tightening efforts.

Sony had posted a net income of 43 billion yen in fiscal 2012, the first profit in five years since 2007, as the weak Japanese yen gave the firm price competitiveness in the global market.

Greg Oh, an analyst at HMC Investment & Securities Co., said Sony still lacks growth momentum in catching up with South Korean rivals.

“The world’s smartphone market is strongly dominated by Samsung Electronics Co. and Apple Inc., as well as LG Electronics Inc.,” Oh said. “Although Sony made significant efforts in the smartphone sector with its Xperia Z1, the gap is still too wide for the Japanese player to catch up to its bigger rivals.” 

Oh also said Sony’s sell-off of PC business would also be limited in impact to the global electronics industry, as the sector is no longer considered as profitable amid the rise of tablet devices.

Sony accounted for 7 percent of the world's TV market in 2013, far below Samsung Electronics' 27 percent and LG Electronics’ 16 percent, which became No. 1 and No. 2 industry leader, respectively.

While Sony took up 23.4 percent of Ultra HD (UHD) TV market, one of the highly anticipated sectors in the global display business, in the July-September period of 2013 to become top player, it will face a fight from rivals this year with the rising demand for larger TV sets for the Sochi Winter Olympics and the World Cup in Brazil.

China’s Skyworth Group Co. and TCL Corp. each held a market share of 17.9 percent and 11.3 percent over the cited period, and Samsung took a 10.1 percent slice in the UHD market, quickly narrowing their gaps with Sony.

Sony, which takes up around 3 percent of the smartphone market as the world's No. 7 player, is yet to catch up with South Korean players for the time being, analysts added.

Samsung, the world’s No. 1 smartphone maker, accounted for 32.3 percent of the global market in 2013, followed by U.S. Apple Inc. with 15.5 percent and LG with 4.8 percent, according to figures from market researcher Strategy Analytics.

Following the lack of growth momentum in TV and smartphone markets, Moody's Investors Service, a global credit appraiser, slashed the rating on Sony last month by one notch to “Ba1,” a junk-level rating.