Kazuo Hirai: the man who keeps Sony singing from the same hymn sheet

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Kazuo Hirai, the head of the electronics giant argues that its diversity and its emotional connection with customers are key to its success.

Its gadgets defined an era playing music on the move became suddenly possible thanks to innovative new technology, and the category powered a giant corporation's expansion into new areas.

The description is not of Apple (NasdaqGS: AAPL - news) , but Sony (Xetra: 853687 - news) , a potent reminder that even the greatest businesses have huge peaks and troughs. Today, more of the company's profits come from financial services than anything else. Kaz Hirai is the chief executive charged with making the group sing together as a whole, in a strategy he calls "One Sony".

At IFA, the Berlin electronics show, he's just unveiled a lens for a smartphone that turns it into a serious camera, and a mobile phone with, on paper at least, the best camera on the market. Respectively, the QX10 and the Z1 have both received high praise.

"As far as the electronics business goes, we need to really concentrate on what we defined as our core businesses," says Hirai. "The QX10 is a manifestation of our emphasis on one of the core businesses, digital imaging, then there's the mobile space in the Zperia Z1. But this is also a manifestation of the technology sharing between the business units. It's a product of the One Sony strategy. It pops its beautiful head into the way that we bring these products together."

Nonetheless, Hirai can't deny the diversity of a £50bn corporation. "The majority of the profits coming from the entertainment business and financial services? Absolutely true. It's not always been that way. There were times in years past when basically the electronics business kept the entertainment companies going, or there were times when the video games business basically kept the entertainment company going.

"So these are cyclical businesses and we are glad that we have these different businesses, because one business may be up and another may be down. But at the end of the day they all make a contribution within the life-cycle of this business over many, many years."

Where activist shareholders, and investors, have questioned the wisdom of a movie studio working together with a TV manufacturer under one roof, Hirai argues that such diversity is a strength.

"For whatever reason, I don't know that [General Electric (Other OTC: GEAPP - news) chief] Jeff Immelt is asked 'Do you have too many tentacles?', and GE seems to have a lot of businesses as well. They're never asked that question but we're put to the test every time. I'm not sure where that different standard is Toshiba, for example, were never asked what's the relationship between nuclear power plants and consumer electronics. And Toyota, famous for cars but in Japan they're a group company that makes sewing machines and prefabricated housing. And Panasonic. I rest my case your honour. So a lot of companies are in different businesses."

But if a portfolio so diverse is acceptable, how does "One Sony" work? "At least from my perspective, the connective tissue between all these business is [that] everything we do needs to get back to this basic idea of moving people emotionally, that heartbeat that skips when you get great hardware, a good piece of music that's the connective tissue for all of this."

Hirai is certainly keen to emphasise that in video-gaming, movie-making, music production and increasingly electronics, too, Sony is keen to benefit from a genuinely emotional connection. And the halo effect might even work in financial services, too, just as Marks & Spencer (Other OTC: MAKSF - news) or John Lewis offer credit cards.

Either way, that emotional connection is a cross Sony must bear, whether it likes it or not. "We're held to a different standard, probably in a good way," says Hirai. "We seem to be regarded as representative perhaps of the cutting edge of companies of Japan, both in good times and bad. In the electronics business people ask us all the time, where's your next Sony-esque product. I don't know that you ever ask Panasonic where's your next Panasonic-y product, or Toshiba or Sharp."

Increasingly, however, it is Samsung that is the technology giant against which others are measured. Hirai argues that again it is the diversity of Sony that equips it to compete. Even so, it's surely frustrating that Sony is on to its third-generation smartwatch, while Samsung's first gets all the publicity at IFA? "If a company is getting a lot of publicity just because they have market share or what have you, whatever they announce is going to get more attention. I don't know if that manifests itself as a reflection of how good or how bad the product is going to be. It's just more visibility. Do I like the situation? Not really, but if you take the PlayStation business, every announcement we make gets huge amounts of publicity because we're in that leadership position."

Hirai argues the logical response is simply to focus on better products. "I basically worry about what I can control," he says.

And if you run a movie studio and make TVs, you can control what gets on to those TVs, for instance. "We tend to focus on this leverage between hardware and software. I basically feel that some people will agree with the philosophy and the thinking and understand what we do, and some people will just not understand that that synergy is there. So, just a recent example: because we have a motion-picture studio, we're providing native 4K [ultra-high definition] content to people who buy the 4K box in the United States which connects only to a 4K Sony Bravia TV. Which basically means you get 4K content you can't get with a Samsung TV."

Some, particularly the activist shareholder Dan Loeb, believe separating Sony's businesses would make for more profit. "People will say, Samsung can go out and get that content licensed. Well, that's true but as far as Sony Pictures content is concerned, we get to decide whether we license content to Samsung, or Apple services if they come up with one or not. That's a leverage point we have, and it's certainly an advantage for Sony 4K televisions."

Hirai points out that it was only because Sony had a film studio, for instance, that it was able to secure the dominance of the Blu-ray second-generation DVD format, by galvanising both hardware and content businesses.

"If you have a company with a vast music library, a vast motion-picture library, and TV, the opportunities to license that and to monetise that are becoming a lot more important for Sony as a business.

"The fact that all this stuff is converging is a great business opportunity. And the advantage of Sony being one hardware and content company is that we get to make that decision. We get to decide. Samsung doesn't get to decide. They come and ask for our permission, and if it makes business sense we say 'yes' and if it doesn't we say 'sorry, not this time'."

With that convergence process, however, also comes a rationalising process, which Sony has already applied to some of its businesses. "Some of them were profitable," says Hirai. "But we can deploy the resources elsewhere. We have a lot of different businesses that may or may not fit our business portfolio next year or the year after, even though they may be a great fit right now. So it's a constant review process we go through."

So perhaps Hirai is after all looking at a slightly more focused Sony? "There's a lot of discussion that goes on looking at the portfolio of products that we have and the portfolio of businesses that we're in. And we have to make those decisions accordingly based on where we see things as they stand and what the potential for their contribution going forward is, and the requirement to keep those businesses going."

It would be easy to read that as a forecast of more job losses. And while in a business of Sony's scale that's often the case, Hirai takes the opposite view: "I see Sony as growing, but not necessarily out of huge acquisitions I think the more important focus for us right now is really to make sure that the electronics business has a strong turnaround story. And I think that we're on the right track. But we still have a lot to do."