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Sony Pursues Bold New Strategy to Challenge Rivals

The airy new Sony store in this central Japanese city has floor-to-ceiling windows, sleek white counters and friendly employees, called stylists, who offer advice and tailored counseling on Sony gadgets.

PlayStation 3
AP
PlayStation 3

“It’s just like the Apple store,” laughed Yuka Hara, 23, a publishing company employee who was one of thousands of visitors on the store’s first day of business this month.

The store’s copycat design, although more hip and up-to-date than the company’s traditional Sony Style retail outlets, is emblematic of Sony’s struggle to regain its footing in recent years after a host of missteps: the company always seems to be playing catch-up instead of leaping ahead.

“Sony once hit home runs, but now it’s lost its touch,” said Akihiko Jojima, an analyst and author of the book “Sony’s Sickness.” “Sony still makes competent products but they’re all just boring ground balls.”

It’s been a humbling fall for the company, which once shook up entire categories of electronics with its Walkman music player and PlayStation game console, and commanded premium prices for top-quality products.

In the last few years, its position as a consumer electronics titan has been usurped by more nimble competitors. The iPod from Apple dominates digital music players. In gaming, both the PlayStation 3 and its PlayStation Portable consoles from Sony trail the competing Wii and DS machines from Nintendo — and the DS is about to get a 3-D upgrade. Samsung leads in the global flat-panel TV market, a traditional stronghold of Sony, based in Tokyo.

Sony’s pioneering e-book reader lost its early lead to the Kindle from Amazon.com . And in the fast-growing smartphone market, an important area for future growth, Sony’s hands have been tied. Under a 2001 deal that spun off its mobile phone operations into a joint venture with Ericsson , Sony has been prevented from offering cellphones that draw heavily on its own other technologies.

All the while, Sony has failed to leverage the wealth of content at its music and cinema arms to the advantage of the wider company.

Sony, while acknowledging its past stumbles, says that its comeback has begun.

“We will go on the offensive in 2010,” said Yoshihisa Ishida, a Sony senior vice president, at the unveiling of a new 3-D television in Tokyo this month. Sony will begin selling 3-D TVs in June, joining an industrywide push to bring the technology behind the hit movie “Avatar” from cinemas to living rooms.

In the next few weeks, Sony will introduce a new online service that will eventually let users download music, television shows, movies and games from the company’s extensive library onto gadgets like computers, Blu-ray players, televisions, game consoles and digital cameras. The network, tentatively called the Sony Online Service, will be based on the company’s existing PlayStation Network, a game download site with more than 40 million accounts.

Sony is working with Google and Intel on Google TV, a platform for a new generation of televisions and set-top boxes that will make it easier to browse the Web on TV screens. The first devices featuring the technology are expected to be on sale this summer.

The company is also working on tablet computers similar to the coming iPad from Apple. “You’ll see many different products that you can probably compare with the iPad,” said a Sony engineer who asked for anonymity because he was not authorized to speak to the news media.

Whatever the mode of attack, the next steps by Sony’s chief executive, Howard Stringer—who promised to make Sony “cool again” when he took the helm at the manufacturer in 2005—will be critical.

Sony Corporation Chairman, CEO and President Howard Stringer
Getty Images
Sony Corporation Chairman, CEO and President Howard Stringer

Sony’s finances, battered in the global financial crisis, are finally improving after an aggressive cost-cutting drive and a revival in sales. In the final quarter of 2009, Sony surpassed analysts’ expectations with a sevenfold increase in profit, to 79 billion yen, or $853 million.

And with Mr. Stringer’s favorite lieutenants finally in place after a management reshuffle last year, investors hope that he can finally focus on his oft-stated vision to link Sony’s hardware with its software. Sony’s stock price has doubled in the last year, outperforming the broader Japanese stock market.

“If you add up all of Sony’s cellphones, digital cameras, music players, computers, you get a network that would dwarf Apple’s,” said Eiichi Katayama, a technology analyst at Nomura Securities in Tokyo. “And Sony also has content. They could become a force to contend with.”

Sony’s new retail concept in Nagoya, which the company plans to introduce worldwide if it is successful, is an effort to showcase its entire network of products. Displays at the store show how various gadgets can work together: a camcorder, Blu-ray player and TV, for example, or a camera, Vaio laptop and digital photo frame.

The store got off to a flying start. More than 300 people lined up for the March 17 opening of the sleek space, designed by the architect Tadao Ando. A line quickly formed in front of Sony’s new 3-D televisions.

“Sony quality has always been the best,” said Yusuke Takagi, 20, a design student in Nagoya, who said he owned a PlayStation 3, a PlayStation Portable and a CyberShot camera. But he said he was also intrigued by the iPad tablet, which goes on sale at the end of April in Japan.

Sony tried to marry its hardware with content long before Mr. Stringer’s arrival. In 1987, Sony bought CBS Records for $2 billion and followed through two years later with a $3.4 billion purchase of Columbia Pictures. By the late 1990s, Sony was pushing what it called a “ubiquitous value network,” in which gadgets would seamlessly communicate with one another, beaming back and forth music, movies, messages and phone conversations.

But a series of blunders continue to keep that network elusive. Norihiko Fujita, a former Sony executive who is now a lawmaker in Japan’s governing party, says Sony’s biggest mistake was to misread the importance of mobile phones.

In 2001, when Sony spun off its cellphone business into the joint venture, “There was the sense that mobile phones were weighing down the company,” said Mr. Fujita, who helped negotiate the deal. “My heart still hurts to think about it.”

With Sony’s mobile engineers dispatched to the venture—and an agreement that forbids Sony from competing in the business—the company found it difficult to work on multipurpose handsets that drew heavily on its other technologies. For example, Sony’s video games arm was prevented from developing a PlayStation phone, according to a person with knowledge of the situation.

Sony officials declined to comment on the cellphone issue.

But in February, at the Mobile World Congress in Barcelona, Spain, Mr. Stringer said that cellphones are now “the world’s most ubiquitous computer” and indicated that Sony would somehow get back in the game.

“We are building a new network service that will connect many more network-enabled products,” he said. “We are committed to extending that service to Sony Ericsson mobile phones.”

Sony needs to focus on building one blockbuster multifunction device, said Mr. Katayama, the Nomura analyst. “It needs to build a network, but it also needs to make sure consumers have a ticket to play.”

At the Nagoya store, at least, expectations were running high.

"I think Sony can make a global comeback,” said Yoshio Kamiya, a university lecturer in computing. “I’m hoping that soon Sony and Apple can finally play sumo.”

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