Sony Picks Foreigner as CEO

Times Staff Writer

Sony Corp. broke with convention and picked the Welsh-born head of its U.S. operations to replace Chairman and Chief Executive Nobuyuki Idei, marking the first time the Japanese electronics giant has named a foreigner to the top job.

In a hastily called meeting early today in Tokyo, the board of directors elevated Sir Howard Stringer, 63, to chief executive of Sony Corp. of America and head of Sony's music and movie businesses. Idei, 67, resigned after nearly 10 years at Sony's helm, the last few of them rocky.

Also out is Idei's right-hand man, President and Chief Operating Officer Kunitake Ando. In his place the board tapped Ryoji Chubachi, who had been overseeing Sony's manufacturing operations and components business.

Sony said the changeover would occur immediately, although the appointments are scheduled to be voted on by shareholders June 22.

Stringer is one of the few non-Japanese ever to lead a major Japanese company, a distinction that on its own made Sony's move notable. But it wasn't unwelcome news to some Japanese.

"I personally don't take it like the black ship taking over Japan. This is to meet changing times," said Mitsuhiro Osawa, an analyst with Mizuho Investors Securities. Besides, he added: "Sony is originally a global company."

Stringer's ascent also underscores the remarkable rise of Sony's entertainment units, once embarrassing appendages rumored to be on their way to new owners. As Stringer himself said in an interview last year, "When I arrived, people were talking about Sony Corp. of America as if it was a sort of parasite organization."

In fact, Sony said Stringer, a U.S. citizen, would split time between Tokyo and New York, where he would continue to run the entertainment business group and Sony Corp. of America -- leaving, for now at least, management in the U.S. intact. Chubachi will take over the electronics side of the business.

Knighted by Queen Elizabeth in 1999, Stringer is a former CBS reporter who served as president of the network from 1988 to 1995. He joined Sony in 1997 and will be the fourth chief executive in the company's 59-year history.

Analysts said he was likely to pursue a strategy similar to the one Idei espoused: use Sony's movies and music to make its gadgets and services more desirable, and vice versa.

Idei, though, struggled to get underlings to deliver on that vision. Sony's profit margins are nowhere near the 10% goal he set for the end of fiscal year 2006. The company in January slashed its operating profit estimate for the current business year, suffering from sliding prices and competition from rivals including Apple Computer Inc.

Neither Idei nor Stringer could be reached for comment. A person close to Sony said it was Idei's idea to resign and elevate Stringer in the hope of reigniting Sony's corporate vigor.

Stringer said in a statement, "We have clearly demonstrated in our U.S. operations that we can achieve significant cross-company efficiencies, and at the same time deliver both extraordinary quality and record returns. I believe the entire global organization is hungry to make this same transition."

Stringer has made a deep mark on Sony. He spearheaded the planned purchase of Metro-Goldwyn-Mayer Inc., which will give Sony one of the world's largest and most valuable film libraries. His team also persuaded German media conglomerate Bertelsmann to form a joint venture between the two companies' music divisions, creating Sony BMG, the second-largest record company on the planet.

"For some years now, some degree of Sony decision making has followed Sir Howard," said analyst Richard Doherty of Envisioneering Group, a consultancy in Seaford, N.Y. "No major decisions were made without him."

Many observers inside and outside the company expect Stringer to be more effective at bringing its many divisions into harmony. Garrulous and witty, Stringer broke down many of the walls within Sony Corp. of America either by persuading managers to collaborate or by bringing in new ones. Among those were Michael Lynton to head Sony Pictures and Andrew Lack, a former television executive with no experience in the recording industry whom Stringer picked to replace Sony Music Entertainment chief Thomas D. Mottola in 2003. Lack is viewed by some as Stringer's heir apparent at Sony Corp. of America.

A veteran of the broadcasting industry, Stringer joined Sony to build bridges between the units that created entertainment and those that built devices. Tokyo gradually gave him more responsibility until by 2001 he was in charge of Sony's movie, music and U.S. electronics units.

The music division has been struggling along with the rest of the industry. But Sony Pictures Entertainment grew steadily profitable with the help of such franchises as "Spider-Man" and "Men in Black." Stringer's cost-cutting also has pared an estimated $700 million a year from Sony Corp. of America's budget.

The electronics side is still its biggest source of revenue, accounting for 65% of its $72 billion in sales in fiscal 2003. In fact, some analysts were shocked that Sony didn't promote Ken Kutaragi, the widely admired engineer who led the development of the PlayStation line of video game machines, Sony's last big consumer electronics hit.

Over the years, Sony's innovative engineers created entire categories of products, introducing the masses to transistor radios, audio and video recorders and CD players. But Sony hasn't scored big with a new product in the last five years.

The electronics division's performance has been inconsistent since late 2001; it reported so large a loss in April 2003 that its shares fell 27% in two days.

Early today, Sony shares gained 1.5% on the Tokyo stock exchange to close at 4,070 yen, the highest in eight months.

The falloff has been most obvious in portable music players, once ruled by the Walkman brand. "Now, Cupertino [Calif.] seems to be the center of audio innovation," said analyst Doherty, referring to Apple and its wildly popular iPods.

"I don't know anybody inside of Sony who's happy about the last five years," Doherty said.

Idei led Sony during a transformative period for the consumer electronics industry, as digital technologies replaced analog ones in almost every product category. The advent of digital also meant a new era of connectivity, both inside the home and through the Internet.

The shift to digital also opened the market to new competitors, including price-cutting powerhouses from the computer industry. Sooner or later, those competitors will turn consumer electronics into commodities, making it much harder for Sony to command premium prices for its brand, analysts said.

"The days of having branded consumer electronics in the living room may be over, or severely challenged," said analyst P.J. McNealy of American Technology Research. And Sony is "waking up to that sooner than anybody expected."

A problem for Sony has been its willingness to handicap its own audio products to guard its music division against piracy, Doherty said. At the same time, Sony has been well-known for letting its divisions pursue their own, inharmonious agendas.

"That probably won't wash under Sir Howard," he said.

Rie Sasaki of The Times' Tokyo Bureau and Times staff writer Claudia Eller in Los Angeles contributed to this report.

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