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15 profit warnings in seven years.
That was the embarrassing pattern Kenichiro Yoshida promised to end after he took over as Sony Corp.’s finance head in 2014. Billion-dollar losses in the famed television business, red ink from personal computers and a smartphone division trying to be all things to all people in the age of the iPhone had the company in a parlous state.
Kenichiro Yoshida, right, and Kazuo Hirai on Feb. 2.
Photographer: Akio Kon/Bloomberg
Now, with Sony on track to post record full-year profits this fiscal year, Yoshida’s top priority as the company’s new chief executive officer will be to make sure that a new era of stability endures. He’s replacing Kazuo Hirai, who will assume the chairman’s role from April 1. Together the pair have turned Sony around by bringing accountability to its varied units, emphasized profits over growth and cut loose legacy businesses where it didn’t have an edge.
“Going forward, we are going to play both offense and defense,” Yoshida said at a news conference. “The top companies by market value in the world are technology companies, and as a tech company Sony feels a sense of urgency.”
The results of their efforts were reflected in earnings figures released Friday. Sony lifted its operating profit forecast to a record 720 billion yen ($6.6 billion) for the year ending March, up from the previous forecast of 630 billion yen. For the three months ended December, net income of 296 billion yen was double what analysts had estimated, as strong profits in the music division and better sales of high-end TVs made up for slowing growth in games and image sensors.
Click here for a closer look at the earnings results.
Sony’s stock has rallied 63 percent over the past year, compared with a gain of 23 percent for the broader Nikkei 225 Index. The shares rose 1.9 percent in Tokyo before the earnings were released.
Yoshida, 58, is highly regarded by analysts and investors for his role in bringing financial discipline to Sony after years of losses from consumer electronics. Under their reign, Sony’s sold off its Vaio personal-computer business, reshaped its TV set unit and focused the mobile business away from a destructive fight for market share. The company has used image sensors and PlayStation games to rebuild the company.
“He knows Sony inside out and is content in playing to his strengths for profitable growth,” said Atul Goyal, an analyst at Jefferies Group. “Yoshida is very soft-spoken, but in person, you can see that he possesses a fierce intelligence and a clever political mind needed to navigate a large organization like Sony.”
Click here for a profile of new CEO Kenichiro Yoshida.
Yoshida, a 30-plus year Sony veteran, spent much of his career outside the company’s core electronics operations, including stints in the U.S., the finance division and investor relations. From 2000 to 2013, he mostly worked for the So-net internet business, rising to the head of the unit in 2005 and taking it public.
Just a month after becoming CFO, Yoshida criticized predecessors for failing to change Sony as the electronics industry changed. He also began giving forecasts for specific sales and profit targets at individual segments, making businesses that span games, movies, music and devices accountable to investors as well as management.
As he led restructurings at moribund divisions, he compared them to emergency surgery and vowed there would be no “sacred cows.” Vaio quickly went on the block. Then he took a $1.5 billion writedown for overhauling the smartphone business. When it became clear the phone unit was still missing targets, Hirai replaced its head with Hiroki Totoki, Yoshida’s lieutenant since the So-net days. Totoki will now succeed him as CFO.
Totoki was also instrumental in the turnaround. He was entrusted to scale back Sony’s Xperia smartphone business from North America amid losses to Apple Inc. and Samsung Electronics Co. Today, the mobile division is a shell of its former self, but Sony sees the unit becoming profitable for a second straight year.
“Hirai’s big mission was moving Sony from the red into the black, so with record profits now on the horizon, I suppose they decided it was time for a change,” said Hideki Yasuda, an analyst at Ace Research Institute. “The fact that the guys with strong records are moving up will be taken well by the market.”
— With assistance by Pavel Alpeyev, Yuki Furukawa, and Hideki Sagiike
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