Sony set to reach earnings goal

Stringer delivers upbeat assessment

By MARK SCHILLING

Stringer

Sony is on target to meet its goal of 5% profit margins by March, Sony CEO-chairman Howard Stringer told reporters Tuesday in Tokyo.

Stringer, who set the goal of earning 5¢ from operations for every $1 in sales when he took over in June 2005, said good news in recent weeks, including strengthening sales of the PlayStation 3 console in the U.S., Europe and Japan, had brought the target closer.

However, he noted that “exchange rate volatility and stock price fluctuations,” as well as an uncertain U.S. economy, may complicate matters. “The U.S. economy’s slowing hasn’t affected electronics sales so far,” he added.

Looking ahead, Stringer said a major theme for next year and beyond will be the expansion of online networking for the PS3 console to other electronics, beginning with the PlayStation Portable.

“Sony is preparing for the digital future by integrating its hardware and software in a digital environment,” he said. Noting that the “wherewithal to connect our many devices” already exists, Stringer said the next goal is digital networking. “We have the tools; we now have to demonstrate what we can accomplish,” he declared.

Stringer also said Sony is not interested in selling its entertainment companies, saying they are essential for Sony’s hardware-software digital networking strategy.

Asked to comment on the viability of Hollywood product in a more competitive global film market, Stringer said, “Hollywood has always been able to do one thing better than anyone else -- produce movies that are global events.”

He also noted the continuing global B.O. strength of U.S. stars.

But for producers and distribs of content, in Hollywood and elsewhere, the challenge of digitization is proving difficult, he added.

Noting the steep decline of profitability in the music biz, he said that the “digital offsets -- revenues from Internet advertising and so on -- don’t come close to making up for the loss.”

Sony’s advantage in this difficult environment, Stringer said, is that it is not dependent on content alone.

“We have a global hardware market that makes us more competitive in a lot of countries,” he said, pointing to Sony’s growing presence in China, India and Russia. “We can become even stronger in (these three markets) and generate significant profits for Sony over a long period.”

Another Stringer priority is technological innovation -- long a Sony strength that Stringer has tried to encourage in his tenure.

While admitting that “big companies have a hard time being as innovative as smaller companies,” he pointed to Sony’s new Rolly music player and organic electroluminescent television as proof that the company still can still generate what he called the “wow factor.”

Innovation is “important for us socially as a company -- it generates confidence,” he said.