Shrinking Slowny

Sony jumps onto Japan's taboo-breaking wagon

Sony Corp is climbing onto Japan's taboo-breaking bandwagon. The troubled giant is selling its ailing Vaio personal computer business to a local buyout fund and is splitting its loss-making TV unit into a separate unit. The message from Chief Executive Kazuo Hirai is clear: Sony is willing to shrink in its bid to return to health.

Japanese companies have been reluctant to offload businesses that aren't performing. But that's beginning to change: rival Panasonic last year sold its health care unit to KKR. Though the final terms for Sony's PC sale are still being worked out, Hirai deserves credit for finding a buyer for a business that was expected to be shut down. Vaio computers, which accounted for seven per cent of group revenue in the year to March 2013, were too high-end to appeal to corporate clients but didn't have the scale to compete with Apple. That was reflected in Sony's measly two per cent share of a market that is rapidly being cannibalised by mobile devices. Global shipments of PCs shrunk by 10 per cent in 2013 compared to the previous year, according to IDC. Televisions, which account for over 10 per cent of sales, are Sony's second biggest problem area. The business, which lost 5 billion yen ($50 million) in the three months to December, is heading for its tenth straight year in the red. Hirai's decision to move it into a wholly-owned standalone subsidiary will give investors hope that Sony might eventually be prepared to part with it.

The restructuring will reduce Sony's annual fixed costs by 100 billion yen after two years and reduce Sony's headcount by 5,000. That takes some of the pain out of the grim outlook for the full year ending in March. Sony now expects a net loss of 110 billion yen instead of an earlier projected profit of 30 billion yen. Sony also revised down its forecast for sales of smartphones - one if its recent bright spots - from 42 million to 40 million units.

It's clear that Hirai still has his work cut out. But by following in the footsteps of sprawling Japanese rivals, he is giving investors some comfort that Sony is finally heading in the right direction.