Sony’s CEO sets modest targets

Shares fall 2% as investors are jolted

TOKYO: Sony Corp, once known for pushing the boundaries of technology, is starting to look a little bit boring under Kenichiro Yoshida.

The new chief executive officer’s reputation as a stoic numbers guy was demonstrated yesterday when he unveiled mid-term targets for the first time as chief executive officer, predicting conservative profit growth across most divisions over the next three years as the company focuses more on content and services.

The strategy announcement echoed results issued less than a month ago, when Yoshida gave an outlook for the current year that set a low bar and jolted investors. The shares fell 2% yesterday, the biggest decline since May 1, the day after the earnings report. While the former chief financial officer said the goal is to generate “high profitability” in electronics, entertainment and financial services, the biggest news of the day was Sony’s agreement to buy EMI’s music catalog for about US$2bil.

“As a former finance executive, Yoshida isn’t the type to make unrealistic predictions, and this mid-term plan plays it safe,” said Hiroshi Kato, general manager at Chibagin Asset Management.

Sony even predicted a decline in the game and networks business, forecasting operating profit of 130 billion yen (US$1.2bil) to 170 billion yen (US$1.5bil) by March 2021, compared with the current year’s outlook for 190 billion yen. Music profits will be 110 billion to 130 billion yen, up from 112 billion yen, while movies will bring in 58 billion to 68 billion yen, compared with 42 billion yen.

“I’m not putting much of my colour on this mid-term plan,” Yoshida said in a speech in Tokyo. “Our vision of moving people’s emotions is unchanged. Our message this time is to pursue that further.”

The measured outlook comes as Yoshida seeks to push Sony toward more-predictable and stable profit streams from gaming subscriptions, online content and intellectual property licensing. At the same time, he expects to sell fewer hardware products - televisions, digital cameras, smartphones and PlayStation consoles – as the rise of Chinese manufacturing has turned gadgets into a business with razor-thin profit margins.

“It’s quite disappointing,” David Dai, an analyst at Sanford C. Bernstein & Co, said of the forecasts. “He’s really set a low bar, too low for investors.”

Sony is targeting operating cash flow of at least 2 trillion yen over the next three years. Capital investments will total one trillion yen, while the rest is earmarked for strategic investments, bolstering the balance sheet and shareholder returns, the company said.

Yoshida said he made a deliberate choice not to set an overall operating profit target, which would have included Sony’s finance division. — Bloomberg