Japanese electronics giant Sony Corp yesterday said that it would spin off its video and sound business by creating a new wholly-owned subsidiary. Sony's three-year revival strategy for FY2015-2017 ending March 2018 is part of the company's larger restructuring, and targets for a 25-fold increase in operating profit in the third year to ¥500 billion ($4.2 billion) by focusing on high-growth areas like camera sensors, games, movies and music. Sony's chief executive Kazuo Hirai who in 2012 introduced the slogan ''One Sony,'' to bring together its diverse operations, said that he foresees spinoffs of other units and may also consider a sale of some struggling units such as television and smartphone. Despite a favourable exchange rate impact, smartphone sales are expected to sag due to stiff competition from global giants Samsung and Apple as well as new entrants. ''I think we have to keep those possibilities in mind,'' Hirai said. However, according to Hirai, the One-Sony approach remains intact. Under the new structure, ''there will be a good balance between centrifugal and centripetal forces,'' he said. The splitting is aimed at more autonomous operation of the businesses, quicker decision making and higher competitiveness to improve the overall profitability. The company plans to complete the spinoff by October. Rather than increasing the sales volume, Sony said it will focus more on transforming itself into a highly profitable enterprise by achieving a return on equity (ROE) of over 10 per cent through the mid-range corporate plan, up from a negative return of 7.4 per cent for the year ended March 2014. In order to realise its transformation into a highly profitable enterprise, Sony will realign its organisational structure and management team. The company will classify its businesses into three categories as ''growth driver'', ''stable profit generator,'' and ''area of focusing on volatility management,'' with respect to global market conditions. Growth drivers include Sony's camera sensors used in Apple and other smartphones, play station, media networks and music while its imaging products, video and sound market will be considered stable profit generators. Areas identified as risky due to changes in business landscape include the television and smartphone businesses. The electronics giant is poised to post a net loss of ¥170 billion for the year ending March 2015, up from last year's ¥128 billion, according to its revised forecast earlier this month albeit the loss is lower compared to the ¥230 billion anticipated fourth months ago. Operating profit for the year is expected to be ¥20 billion instead of a loss of ¥40 billion predicted in October. Sony said that the impact of recent cyber attack on its result of the current year will not be significant. According to analysts, the new arrangement is a good step, but the question would be how much the company would invest on high growth areas and how much it would not spend in risky areas to make them profitable. So far, the electronic giant's restructuring has seen the sale of its personal computer business Viao and spin off of the television business last year and thousands of job cuts. Source: domain-b.com
