News Article

PS4 Propels Sony Back to Profitability, but Kaz Hirai Vaporizes Vaio

Posted by Sammy Barker

All change in the television business, too

Oh no, it’s not financials day, is it? This disgruntled editor may have studied business for several years, but can’t seem to bring himself to look at a balance sheet these days. Nevertheless, our favourite electronics manufacturer has dropped a bit of a humdinger today, confirming that it’s dumping the Vaio brand and spinning off its television business. In short: the hairs on chief executive Kaz Hirai’s head turned a little greyer over the past 24 hours.

Let’s start out with the good news: PlayStation is doing exceptionally well. Sales in the division soared by a colossal 64.6 per cent year-over-year on the back of the PlayStation 4’s launch, with that increase contributing to an overall company net profit of $257 million for the third quarter of the fiscal year, which concluded at the end of December 2013. We know that the company had sold 4.2 million next-gen systems to consumers by 28th December, but the firm didn’t provide an update on that.

Instead, it’s continuing to group its consoles together. Both the PlayStation 3 and PS4 moved 7.8 million units during the abovementioned period, while the PlayStation Portable and Vita managed just 2 million. That all amounted to a profit of $172 million for the game business, which will no doubt have planted a sly smile on group president Andrew House’s always optimistic countenance.

Now to the bad news: the period of profitability is not going to last. The manufacturer anticipates that it will lose approximately $1.08 billion for the fiscal year as a whole, as it works to restructure its television business. According to the firm, this will be spun-off as its own subsidiary, where the company will place an emphasis on the 4K market and cutting costs. It expects this transition to be completed by July 2014, where it hopes to turn a profit in the fiscal year to follow.

Things aren’t looking quite as rosy for Vaio computers, however, as the organisation has opted to dump the brand entirely. The business will be sold to Japan Industrial Partners in a move which it describes as “the optimal solution” to the problem that it faced returning the department to profitability. Pending negotiations, the ink should be dry on the deal by the end of March 2014. The electronics giant will then turn its attention to smartphones and tablets.

And, of course, all of this will come with significant job losses. Sadly, the company confirmed that a whopping 5,000 employees will be let go over the next twelve months, with around 1,500 in Japan and a further 3,500 globally set to be out of work. According to the manufacturer, this move will save it an estimated $986 million per year. A necessary evil, then, but still one that’s going to cause serious upset around the world. Who’d be a CEO, huh?

[via sony.net, joystiq.com, eurogamer.net, bbc.co.uk]

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User Comments (30)

Jaz007

#1

Jaz007 said:

It looks like Sony is going through restructuring and therefore taking losses, but will come out strong and profitable after alls said and done. Kaz looks to be a great CEO, a man with a real vision for the company.

You studied business for a few years? That's pretty cool, I has now idea you had qualifications for that.

KALofKRYPTON

#2

KALofKRYPTON said:

I can't believe they're selling Vaio off. What a shame.
I know Vaios are rather unnecessarily expensive when broken down to their component parts, but no one makes nicer PC hardware than Sony.
I bought a Vaio Duo 11 Ultrabook last year, very expensive, but so very, very good!

XCWarrior

#3

XCWarrior said:

@Jaz007 Make sure not to ask the 5,000 people losing thier jobs if they think he's a great CEO.

Shouldn't Kaz be taking a 50% paycut, which might offset some of this $1 billion loss?

get2sammybAdmin

#4

get2sammyb said:

@KALofKRYPTON Yeah, I've always liked Vaios, too. I think the problem is that people don't really buy computers in the numbers that they used to; for most people, a tablet is more than enough for general web browsing.

It's probably the right move, even though as @XCWarrior says, it's a shame that so many people are going to lose their jobs. Kaz Hirai has taken a pay cut in the past, and the board regularly gives up any bonuses: http://blogs.wsj.com/japanrealtime/2012/06/27/sonys-welcome-for-new-ceo-forget-your-bonus-heres-a-pay-cut/

From an outside perspective, I do think he's good at his job. Sadly for the person at the top, sometimes doing your job involves impacting the lives of thousands beneath him. It must take a very strong character - especially when you're talking about enormous numbers like this. The thing is, I guess you have to look at it from the angle that by doing this he's saving the jobs of thousands of others... :|

Gemuarto

#5

Gemuarto said:

Yeah, computers starting to be outdated, like cassete players, for example. So, it's smart move for Sony to sell it now and concentrate resources on more popular things.

AeroZeppelin

#6

AeroZeppelin said:

It Really sucks that 5,000 people are losing there jobs but sony is only doing what they need too do I hope the bast for those 5,000 losing there jobs and hope they find work soon

Gemuarto

#7

Gemuarto said:

Maybe it's time for Sony to create gaming tablet or something.Looks like normal handhelds are really on their last run =).

SimonAdebisi

#8

SimonAdebisi said:

He's taking on a mess and I think he's doing the right things. He clearly has a good command of common sense.very much good luck. Hopefully when alls done they can create a profitable TV and PC business.

BornOfEvil

#9

BornOfEvil said:

It's sad to see Sony leaving one of the markets it helped pioneer, but the positives outweigh the negatives in this situation.

I'm glad to hear that they'll be strengthening their smartphone/tablet division on the heels of the Xperia Z1 Compacts launch - they'll need to work hard to keep it up.

AeroZeppelin

#10

AeroZeppelin said:

@Gemuarto Yeah computers starting to be outdated Uh PC gameing is a very profitable market now that sony are not makeing PCs anymore they'll be losing out on the PC gameing market

Epic

#14

Epic said:

The sad thing is that this was the right decision even though all this people lost their jobs.
The worse part is that this will not be the last time.

KALofKRYPTON

#15

KALofKRYPTON said:

@DaftPlayStation Sony would never make a 'gaming PC' anyway. They'd price themselves out of the market with one and it is a little at odds with the PlayStation family at the moment.

It's good to see such sweeping change so fast in reaction to their numbers. Shame about job losses, but skilled people are never down & out for long.

It's quite the contrast to Nintendo, who's only concession to their own situation seems to be a half arsed licensing option.

charlesnarles

#17

charlesnarles said:

I had a hand-me-down Viao laptop for years before I got an HP which broke (screen/lid cracked in half) almost immediately. Also had a Viao desktop I suped-up to play Oblivion. Really respectable hardware, in my experience, so I'm kinda surprised to hear this. I thought they were doing fine

rjejr

#18

rjejr said:

@KALofKRYPTON - "It's quite the contrast to Nintendo, who's only concession to their own situation seems to be a half arsed licensing option."

Well Iwata did personally take a pay cut ;-)

Hard to compare the 2 companies. Yes they both make videogames and hardware to play those games on. But that's pretty much all Nintendo makes. Sony makes tvs, stereos, computers, tablets, phones, movies, music - and that's just off the top of my head, I'm sure there's other stuff. Sony is a worldwide consumer electronic behemoth. Nintendo makes games. Is it any surprise their CEO's handle things differently?

goonow

#19

goonow said:

Amd and sony have both started making a profit because of the ps4. The ps4 is a miracle macheine.

KALofKRYPTON

#20

KALofKRYPTON said:

@rjejr Not at all. Nintendo are a games company. They make hardware to facilitate that games experience, and that's all they want to do.
But the WiiU debacle (I think it's utterly fair to define Wiiu as a commercial disaster) has shown them up for their narrow-mindedness and lack of forward planning. They still treat third parties like crap like they always have, despite Sony and Microsoft being dominant in the market and having companies and indies scrambling to release on their machines. As I say, only in this past week have we seen Nintendo deign to offer up possible licensing opportunities for their games and characters in an effort to make the most of the market, as if they're not continually losing money.
They've had a long time to observe WiiU's fortunes and react, and done little to help it along- perhaps in the hope that it would recover as the 3DS did, but it's not going to do that without developer support.

BornOfEvil

#21

BornOfEvil said:

@KALofKRYPTON "Sony would never make a 'gaming PC' anyway. They'd price themselves out of the market with one and it is a little at odds with the PlayStation family at the moment."

Sony has actually done a fairly decent with the pricing of their newer products, so I doubt they'd price themselves out of the gaming PC market - Nvidia hasn't and their tech is insanely expensive.

BJQ1972

#22

BJQ1972 said:

Very odd definition of profitability. There are 5000 people who would very much disagree tonight.

JaxonH

#23

JaxonH said:

@KALofKRYPTON

Actually, contrary to your belief, 3rd party support on Nintendo platforms has nothing to do with "Nintendo treating them like crap". There are a number of reasons for current lack of support, but that's not one of them. It depends on the generation in question, and on a case by case basis. But generally speaking, most 3rd parties like Bethesda want to dictate the terms of the console in exchange for support. Which will never happen because Nintendo builds their hardware with their own software in mind, and must consider the hardware strength/price/development costs and development time relationship curve.

Unfortunately, the remaining 3rd parties want results, and a base of 5 million cannot match the sales of consoles with over 80 million loyal customers. Couple that with a horrible sales year and slow growth, and the fact that a higher percentage of PS4/X1 owners buy AAA games than Wii U owners, and it's no surprise that most AAA support has been scaled back or cut off completely. There is no doubt Nintendo's made its fair share of mistakes with the Wii U (my personal pet peeve is marketing the console as a casual system for stereotypical Americana- the console is a great core system for their franchises, and they need to market it as such).

Fortunately for them, they have been sustaining their consoles without AAA support for the last 20 years, so I'm not particularly concerned. And as much as I do wish them well, I'm somewhat glad they've run into some hurdles with sales. Money gets people's attention, and quick. Perhaps this is the wake-up call they need to get it together and put 'er in overdrive. Also, Nintendo is not and has never been "continually losing money". In fact, if I recall they've actually posted more profits over the last 2 decades than any other console manufacturer in the industry. They projected one fiscal year operating loss, which I think we all kind of saw coming after the slump Wii U had last year. Nintendo's got some issues to iron out to be sure, but as a gamer, it's all small potatoes. Just like I couldn't care less about Sony posting losses most of last generation, I really don't see how Nintendo projecting one operating loss is relevant. As long as I can play lots of great AAA games on my PS4 and Vita, I'm happy. As long as I can play lots of great exclusives on Wii U and 3DS, I'm happy. Screw the politics.

mibtar

#24

mibtar said:

... and stop making movies without people wearing red and blue costumes!

Grockumus

#25

Grockumus said:

Just got an email this morning regarding the closure of the Reader Store as well.
And on top of VAIOs being discontinued, my Reader Daily Edition as well as my VAIO will become relics way sooner than I'd like :(
Then again, the laptop/e-reader market has been over-saturated (and is becoming slowly obsolete), so now Sony can start making serious gains, and focus more on what really matters. This is good news, a little sad, but good news!

Gamer83

#26

Gamer83 said:

To some degree you have to have no feelings to be a CEO. Having worked for GameStop, I know first hand some of the bs people who work under the corporate d-bags have to deal with and what's especially annoying is many of these d-bags didn't do sh*t to earn their positions and don't give a second thought to throwing people out on the street. You have to be a true scumbag to do that, and sorry, I know this is a family site but there is no nice way to put that.

Now, I'm not going to accuse Hirai of that because he seems like a decent, hard-working person who actually went up through the ranks. But if I were one of those 5,000 without a job, even if he took a paycut, can't say I'd have the greatest of feelings towards him.

artemisthemp

#27

artemisthemp said:

I am sad to see Sony Vaio laptop go, since my Sony Vaio laptop was my best Laptop (until a nosedive into the floor broke the PSU intake)

KALofKRYPTON

#28

KALofKRYPTON said:

@JaxonH
They charge higher licensing fees to third parties than any of their competitors (historically and currently), they're never forthcoming with dev kits and often are very late delivering hardware.
Nintendo first party games are a good reasons to buy Nintendo hardware, but can't be the only reason. As has been evidenced by WiiU.

Shaolin

#29

Shaolin said:

Let's face it Sony is very well respected business with massive brand penetration and loyalty. PlayStation is strong and is very unlikely to be leaving Sony any time soon.

But what these recent events do mean is that Sony is going to have a much tougher time raising money because Moody's has just downgraded their stock to the lowest level there is. The only way that concerns me as a gamer is if funding on 1st party titles like Uncharted get capped. Otherwise I'm sure it will be business as usual for us PlayStation fans.

JaxonH

#30

JaxonH said:

@KALofKRYPTON

Very well put.

And I do agree, if Nintendo expects to do well they'll need more than just their own internally developed software, even if it is top notch. I don't necessarily think it has to be the AAA support Sony and MS gets though. I think that a combination of digital exclusives (like Scram Kitty & His Buddy On Rails for example) and 3rd party partnerships (whether they be collaborations like Shin Megami Tensei x Fire Emblem and Hyrule Warriors, or signed excusives like Monster Hunter 4 Ultimate and Bayonetta 2) could serve to fill missing genres and release gaps as needed.

I do still think they could do moderately well on mostly 1st party content, if they'd just market their products correctly. A big part of their problem is perception. It's how people perceive the Wii U. The NA ads are hurting their cause rather than helping them. It's a legitimate console with some really fun games, but imo they've forgotten how to make their consoles look "cool and fun". Super Mario 3D World is a superb title that most gamers would enjoy, yet they market it as some family tea time multiplayer experience. That ship has sailed, and I think they're finally realizing that, as evidenced by a surprisingly decent DKC Tropical Freeze ad on TV.

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