Sony announces reorganization and renewed commitment to profitability

Sony announced on Wednesday it was undertaking a major reorganization, including spinning off its video and sound segment into a separate subsidiary and  organizing its businesses into three groups by growth prospects, with content, games and image sensors at the top and smartphones and TVs at the bottom. According to Sony CEO Kazuo Hirai, the ultimate goal is to keep the video/audio and television divisions focused on profits while the parent seeks growth in  movies, music, video games and image sensors.

Sony Unveils Major Reorganization Plan

Hirai also commented on Wednesday that other units could be spun off. By the same token, the company would consider a sale of the TV unit or smartphone business, though there are no current plans to that effect. “I think we have to keep those possibilities in mind,” he noted.

Sony does currently have a plan in place to increase operating profit to ¥500 billion ($4.2 billion) within three years. Based on recent guidance, the electronics giant is on track to report an operating profit in the year ending in March, with the television division in the black for the first time in more than 10 years.

Statement from business professor Atsushi Osanai

According to Atsushi Osanai, an associate professor at the Waseda Business School in Tokyo and former Sony exec, with the new structure, “each business unit will be more flexible and speedy in making business decisions and will be asked to be more responsible for what they do. A challenge for Mr. Hirai is to make sure these spun-off segments remain coherent as one Sony group.”

Sony sharpening focus on profitability

Sony has been keeping an eye on the bottom line since Hirai appointed a new CFO, Kenichiro Yoshida, almost a year ago. Although the company still anticipates posting a net loss for the year ending March 31, it offered positive guidance for its operating results not long ago, projecting a profit of ¥20 billion rather than a loss of ¥40 billion. Since Yoshida took over last April, Sony shares are up a solid 58%.

Of note, the firm has already spun off its personal-computer unit, and announced earlier this month it was closing down its in-house music streaming business and replacing it with Spotify AB.

In a recent presser on the firm’s midterm strategy, Hirai kept the conversation more on profitability goals than big visions for Sony’s future. He also noted the company plans to achieve a 10% return on equity over the medium term.