Sony Trusts CEO to Pull It Together
Executives of the television teen drama “Dawson’s Creek” naturally planned to display Sony Corp. personal computers when they shot a classroom scene seven years ago. After all, Sony produced the show.
But the company’s PC arm wouldn’t cooperate -- and “Dawson’s Creek” was forced to feature products from rival computer makers.
Howard Stringer, who joined Sony in 1997 as president of its U.S. operations, “saw the silliness of it all,” said a Sony executive who spoke on condition of anonymity. Over the next few years, Stringer made sure that Sony’s movies and TV shows highlighted Sony gadgets. Now, for example, “Jeopardy” gives away Sony electronics and other products as prizes.
Stringer’s skill in persuading the Tokyo-based company’s fractious divisions to cooperate with one another in the United States was one reason the board on Sunday made him the first non-Japanese chief executive, succeeding longtime CEO Nobuyuki Idei.
Wall Street approved: Sony shares jumped 77 cents to $39.31 on Monday on the New York Stock Exchange.
“Sony’s got tremendous resources that no other company has,” said Richard Doherty, an analyst at Envisioneering Group. “They just need a leader who knows that the whole of Sony can be greater than just the sum of its parts. And Howard realizes that.”
The $70-billion company, Doherty noted, has a vast music and movie catalog, a powerful brand name, broad distribution in 9,000 retail stores and a deep expertise in consumer electronics.
But in recent years, as digital technology replaced analog in the worlds of consumer electronics, music and movies, Sony was caught flat-footed.
Nowhere else was this more evident than with Sony’s portable music products, a market in which the company is struggling to catch up to smaller, nimbler rivals such as Apple Computer Inc. and Creative Labs Inc.
Sony had shunned the popular MP3 format, contributing to a poor showing among the nation’s top manufacturers in the fast-growing market for flash memory-based digital music players. The company ranked 13th in the 12 months ended Jan. 31, said Ross Rubin, an analyst at NPD Group Inc.
Sony has taken steps to correct that. It is unveiling today a suite of nine flash-based MP3 players that will be no more expensive than most competing products -- an unusual strategy for a company accustomed to charging a premium.
“This is a very important move for Sony,” said Susan Kevorkian, an analyst at IDC, who noted that the market for flash players would more than double over the next four years, leaving lots of room for Sony to catch up.
The board is banking on Stringer to put new life into its consumer electronics division, which accounts for 70% of the company’s sales but just 35% of its operating profit.
To lend a hand, the board appointed Ryoji Chubachi, who oversaw Sony’s manufacturing operations and component sales, as president.
“Without the revival of electronics,” Chubachi said at a news conference in Tokyo on Monday, “there’s no revival of Sony.”
Stringer readily acknowledged the company’s challenges.
“The world is not the same place it was just a few years ago,” Stringer said in a memo to employees Monday. “We will accelerate cross-company collaboration, thereby revitalizing the company and promoting creativity.”
In addition to launching the new line of MP3 players, the company has made several big strategic bets, including revamped digital music offerings; a new chip code-named “The Cell” to be used in many devices, including the next generation of the PlayStation game console; and a high-definition successor to the DVD format called Blu-Ray.
Sony also has aggressively pursued acquisition of music and movies through its pending $4.9-billion purchase of Metro-Goldwyn-Mayer Inc. and its joint venture last year with German media conglomerate Bertelsmann to form Sony BMG.
In order to make those investments pay off, Stringer will need to pull the company’s many parts together, analysts said.
What Sony has to do now is adapt to the new environment, said Van Baker, analyst with Gartner. That will mean making better use of its chips and software in multiple products and overcoming a bias against technologies not invented by Sony.
Stringer’s elevation was hailed by those inside Sony who have been eager to exploit the digital transformation of audio, video and home entertainment gear.
“Howard has been a believer in the convergence of entertainment, software and hardware and has stated it for a long time,” said Yair Landau, president of Sony Pictures Digital.
The hardware and entertainment divisions have been working too independently for too long, Landau said.
Sony has launched a series of digital services that try to capitalize on the proliferation of powerful home computers, high-speed Internet connections and digital entertainment. Some have been clear successes, such as the EverQuest online computer game. Others have gotten off to slow starts, such as the Movielink downloadable movie service and the Connect online music store.
Stringer’s version of convergence isn’t confined to Sony products -- it’s also about bringing disparate groups at Sony together.
“He is culturally convergent, not just technologically convergent,” Landau said.
Analysts said Idei, who spent the last several years at the helm trying to unify the company, chose Stringer because he felt a non-Japanese executive would shake up the 59-year-old company.
The Welsh-born Stringer, an American citizen who was knighted in 1999 by Queen Elizabeth II, has effectively used charm and wit to help marshal Sony’s disparate groups inside the U.S.
Stringer’s clout within Sony grew after he spearheaded a turnaround of the U.S. entertainment operations. He’s credited with bringing in fresh blood through unconventional hires, and demanding radical financial cuts to what had been bloated television, movie and music businesses.
“Howard has shown himself in the critical entertainment areas to have a great sense of casting, and he’s unafraid to make dramatic and difficult decisions,” said Joe Roth, head of Revolution Studios, of which Sony is a financial partner and distributor of its movies.
In 2003, Stringer orchestrated a major shake-up at Sony’s global music division, which was suffering a steep decline in sales amid a free-spending culture.
He also engineered a complete restructuring of Sony Pictures Entertainment. He and Rob Wiesenthal, Sony’s top financial executive in the U.S., slashed more than $150 million in annual costs, much of it on the money-losing television side.
In late 2003, Stringer made another highly unusual hire on Sony’s movie side by tapping former America Online and Walt Disney Co. executive Michael Lynton, who had limited movie experience, to succeed industry veteran John Calley as CEO of Sony Pictures Entertainment.
“He sets the agenda, and then you are given the resources and leeway to act on it,” said Lynton, who speaks with Stringer daily. “If he doesn’t like something, you hear about it quick.”
Most recently, Stringer and Wiesenthal helped Sony put together an investor group to buy the famed MGM movie studio. That deal, which will give Sony a vast combined library of nearly 8,000 titles, is expected to close in April.
Idei, who played a critical role in selecting his successor, praised Stringer’s track record in Sony’s entertainment division.
“We’ve had a trusting relationship,” Idei said at Monday’s news conference. “We had some difficulties in Hollywood. But he’s dealt with such troubles.”
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Times staff writer Jon Healey in Los Angeles and Rie Sasaki of The Times’ Tokyo Bureau contributed to this report.
