Sony Executive Insights: New CEO, Gaming Business

On Thursday, Sony Corporation ADR (NYSE:SNE) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Daniel Ernst – Hudson Square Research: Three questions if I might. First, Hirai San has had the new role of CEO for about 40 days now, so wondering if you could provide kind of survey first 40 days of report card on what the mood at Sony is, how it’s progressing, what, any thoughts you can give us on the change in leadership and how Sony is doing about it. Two, on game division, some of the publishers here are starting to talk about their investment in the next-generation consoles and I know you don’t want to announce any products, but want to see if you can comment on where you kind of think we are in the cycle with the PlayStation 3 having margin global installed based now profitable and what your strategy is about sort of harvesting that base now relative to going out and building new platforms and then three, on the Sony Mobile division, Android competition now has gotten more competitive, but seems that there has been a consolidation of leadership among one or two, and some of the early guys, like Motorola (NYSE:MSI) and HTC have really struggled in product innovation, and could you sort of comment on what do you think the prospects are for Sony Mobile in the Android space as we progress through the year. Thanks.

Kazuo Hirai – President and CEO: Hi, this is Kazuo speaking. I will answer the first question about (indiscernible), how is it doing in the first 40 days. I will sum it up in saying that it is very enthusiastic gear up to put the team together and turn around the company. Since its announcement early in February, the management team has constantly been in discussion, to see what the problems are with the company, how to realign the organization, make appropriate assignments in personnel, all those things we’ve put in place during the – two months since it has been in office. I think, during the strategy meeting that took place on April 12, I think a lot of the audience, the market could feel a sense of purpose here. Not that we lacked it in the past, but more kind of a stepped up, geared up energy, within the company. That’s my (indiscernible) today. Next, your question about the gaming business, next generation console. As you said, I cannot touch upon anything upon the next generation console today. But as you rightly said, PS3, in it’s current stage of the lifecycle, we are still, I think, are in kind of midstream, the life of the platform. The momentum is still very strong. We sold about 14 million units last year. This year’s projections — also home console is about 16 million this year. This includes the PS2 also. We’re categorizing this as a home console so category and the numbers are 16 million, so as the installed base grows as you know, we make a lot of money on the software side and I think this trend will go on for another about hopefully several years. So we’re not in kind of a desperate need more to have a next generation coming to the business, but as I said I cannot touch upon the new generation at this point in time. If we do have anything to discuss I think the people at SC will deliver that message to you. The third one, mobile. Here Kuni Suzuki has been assigned for this business together with other parts of the mobile business that we have mainly in tablets and in PCs. Now what he’s trying to do is to kind of concentrate all the resources in terms of technology, marketing etcetera to revitalize the business that we have in smartphones. Now I think you can appreciate that in the past, we had a joint venture with Ericsson which was a good joint venture I would say, but in terms of product development sharing technology joint ventures always have some limitations. Now with that limitation gone, we can go full ahead putting together all the technology resources that we have within the Company, also combined that with the network business resources and other content starting from games to music to movies and put all those things together to make our offering in smartphones an attractive option for the consumer. That is the kind of a bold strategy we’re looking at the moment. I must say that in the first fiscal year this year we’re in the turnaround mode in the smartphone business and hope this business will churn out profits from the next fiscal year. Does that answer your question? I hope.

Daniel Ernst – Hudson Square Research: I does.

Gaming Business

Jeff Loff – Macquarie Capital Securities: Within the gaming business, for the network services portion, can you tell us how much revenue was from that business in the fourth quarter and then give an update on your targets and progress there?

Kazuo Hirai – President and CEO: Network business is on an increase, yes, but as we – you recall last year, we did has this an unfortunate incidence with hacking which did impact our business somewhat, we do have all our customers returned to our service because I think some of the games that we offer, are (indiscernible) for our customers but nonetheless in order to get our security systems up and etcetera, development of the systems and the product offering have been somewhat delayed, so in that sense we’re little bit behind in the sales projections for the last fiscal year, but year-over-year, we’re on a continuous arise at the moment. Now coming into this fiscal year, we hope this trend to continue as the install base of the adoptable product increase in PS3, PSP, Vita, et cetera, So slightly behind in our projection since last year, but still on a very firm foundation to build the business.

Jeff Loff – Macquarie Capital Securities: What’s the level of sales for last year?

Masaru Kato – EVP and CFO: In term of revenue JPY 66 billion, that was the revenue for fiscal year ending March 2012.

Jeff Loff – Macquarie Capital Securities: Then staying on the games business, for the portable devices you gave the target of 60 million units, are you able to break out the expectation for PSP and Vita?

Masaru Kato – EVP and CFO: Of the 60 million approximately 10 million is Vita, the rest PSP.