Sony gains ground on margins

After a tumultuous start to his reign at Sony, Sir Howard Stringer may be on the brink of keeping a promise few thought achievable: group margins of 5 per cent by March 2008.

For fiscal 2005, the year Sir Howard took the helm, margins were 2.6 per cent, and Sony has since been hit by the world’s largest battery recall, problems with its Cyber-shot digital camera screens, and losses arising from PlayStation 3.

In spite of these setbacks, the Japanese group remains on course to reach its 2008 target, which, according to investors, continues to hinge on the core electronics business.
The division has made robust progress in re-establishing the Sony brand.
Bravia LCD televisions are selling far better than expected, as is the company’s range of digital cameras.

With the following wind of a weak yen, the electronics division logged third-quarter profits of Y177bn, a 100 per cent increase from the same October-to-December period in fiscal 2005.

On Tuesday, Nobuyuki Oneda, the group’s chief financial officer, said the electronics business was aiming for 4 per cent margins in fiscal 2007, against 1.4 per cent in the year Sir Howard became president.
When Sir Howard took control, his inheritance was not pretty, with the flagship electronics brand seemingly short of ideas in a world of Apple iPods, Nintendo DS games machines and Samsung flat-panel televisions.

It seemed unlikely at the time that Sir Howard – a manager who had risen through the television and movie businesses – would be able even to identify the problems that needed fixing.
But Sir Howard’s skill, said one analyst, has been in forcing Sony to abandon its tendency to over-engineer products and concentrate on designing things that sell.

Sony’s first non-Japanese president has remained an aggressive promoter of the company’s movie business, a source of profitability regularly absent from Japanese analysts’ discussion of Sony’s prospects.
The group said on Tuesday the movie business made consensus-beating profits of Y26bn and earnings for the division in fiscal 2006 could had soared 73 per cent from the previous year.

Sony Computer Entertainment, which makes the PlayStation 3 consoles and was forced on Tuesday to admit plunging shipments of its handheld PSP machines, is still apparently unresponsive to the Stringer touch.
source:www.ft.com