Kenichiro Yoshida, chief financial officer who has a key role in the turnround strategy launched by chief executive Kazuo Hirai says it is time for the electronics and entertainment group to shed this negative legacy and start investing in the future “What this company needs is a positive mindset that is willing to grasp future opportunities. That’s the challenge for our management team,” he tells the Financial Times.
Mr Yoshida was speaking in his first media interview since becoming CFO and second in command to Mr Hirai, in April 2014.
“Until now, we rarely turned to mergers and acquisitions for our research and development, but we will be looking for those opportunities to take on new challenges,” Mr Yoshida says.
But changing the mindset of employees used to tough times will not be easy. The company racked up losses totalling more than $8.8bn in the past seven years, and in excess of 35,000 employees have been let go in the past decade. Much of that time was spent on scaling down Sony’s businesses, resulting in the sale of its Vaio PC business and the spin-offs of its TV and Walkman divisions.
It is still plugging losses from its smartphone business. Some investors are not convinced it needs to keep the unit but Mr Yoshida says the company has no plans to sell its mobile division.
Sony signalled the first signs of a shift in approach last month when it announced a plan to raise Y420bn ($3.4bn) through the sale of new shares and convertible bonds. About 84 per cent of those proceeds will be spent to strengthen its camera sensors, while the rest will be used to repay its debt.
Having relinquished its lead in portable music players and TVs, image sensors is one of the few areas in which Sony still holds sway. In terms of value, the company controls about 40 per cent of the global market for CMOS sensors which are used in Apple’s iPhone 6 and Samsung’s Galaxy S6. Its image sensor business accounted for nearly a third of its first-quarter operating profits.
As more homes and cars become connected to the internet, Sony hopes the demand for higher-quality sensors will expand further. Mr Yoshida says potential M&A targets include start-ups with skills in computer algorithms to perform image processing.
Since Mr Yoshida became CFO, share prices have nearly doubled. Investors have welcomed greater transparency he has brought to the company including the disclosure of financial targets for each business segment and an increase in investor briefings.
People who know Mr Yoshida describe him as blunt and ruthless in seeking explanations for failure to meet targets, although he rarely raises his voice. He also has a reputation for digging up embarrassing numbers that employees would rather forget — such as a poor record of 15 profit warnings in the past seven years.
“You have to face reality. I feel disclosing the bad parts will lead to accountability and transparency,” Mr Yoshida says.
Sony’s previous restructuring attempts were often hampered by former executives who continued to see the company’s future in gadgets instead of software. In April, Mr Hirai received a scathing letter from a former chief financial officer, calling for the instalment of more engineers to revive “the Sony spirit”.
“It’s very difficult to move a company with the size of Sony from one way of thinking to another. To a large extent, the current management has achieved that,” says Pelham Smithers, who runs a boutique research firm focused on Japan.
When Mr Hirai turned to Mr Yoshida to help with his turnround plan, the new CFO warned employees that he would not be able to make everyone happy. Those words quickly turned true as Sony jettisoned its PC business and announced plans to cut more than 2,000 jobs in the mobile segment.
“There is nothing that is everlasting,” Mr Yoshida says. “But we want Sony to survive in a good shape.”
Analysts say a bigger test for Mr Yoshida is to come as Sony completes its final leg of fixes to its businesses.
“Sony needs to go beyond a restructuring phase for its next stage of growth. This is only the beginning and we still do not know whether Mr Yoshida can deliver on that front,” says Eiichi Katayama, head of Japan research at Bank of America Merrill Lynch.
Mr Smithers adds that Sony’s recovery still seems cyclical. “We need to see how Sony does in a downturn to be able to demonstrate the extent of its improvement.”
Source : FT
