Bye Bye-O to Vaio: Sony Is The Canary In Two Coal Mines

Feb 6 2014, 4:54pm CST | by

Bye Bye-O to Vaio: Sony Is The Canary In Two Coal Mines

Sony never was a big seller of PCs, so its decision to dump its unprofitable computer business shouldn’t come as a huge surprise. That said, the swift decline of the fading consumer electronics giant in PCs and a 10th straight year of losses in the TV division are unpleasant reminders that when the ground starts shifting underneath you, it can swallow up everything in its path.

The PC business at Sony is a small player, accounting for only about 2% of global sales, according to IDC. The vast majority of those are stylish, well-featured machines sold directly to consumers. And while the PC market overall has been slipping, Sony sheds some light on how difficult that segment has been. It sold under 6 million Vaios last year, down a remarkable 33% from 2010. (In the same span, the overall market has shrunk about 10%.)

Sony’s troubles actually began earlier than many manufacturers because of its reliance on consumers. In 2010, Apple introduced the iPad and the battle for home-computing dollars was on. It might not have been clear at the time, but the effect has been profound. Where the upgrade of a PC was once a rite of passage in the home, the big deal now is buying the tablet — or the once-every-2-years new smartphone. None of this means the PC doesn’t remain useful, but rather that it, well, remains. When it’s time to run TurboTax or sort through hundreds of photos from the vacation to Africa, there’s still no better choice. But when it’s time to buy a shiny new toy, there almost certainly is.

The good news for Sony is that one of those new toys is the Playstation 4, which is off to a strong start in sales. But outside of that uptick, Sony’s electronics groups are struggling. The mobile-phone division has built some beautiful new products since Sony dropped the Ericsson partnership, but growth remains a challenge. Sony trimmed its forecasts for phones today from 42 million to 40 million. It’s a reminder than in the Android world, differentiation is hard and the high end is especially competitive with Samsung not ceding ground easily. Quite the reversal of fortune for the two companies as Samsung was once the upstart, Sony the dominant leader.

It’s that history — and perhaps only that history — that justifies Sony’s continued presence in the TV market. Sony announced that they will “spin off” their TV division, but the current plan is to hold onto 100% ownership. The old line about insanity as doing the same thing over and over and expecting a different outcome seems applicable. Sony will lose about $250 billion selling TVs this year. Doesn’t sound like much, but the TV division last turned a profit in 2004. YouTube didn’t exist yet and Netflix streaming was a talking point on a slide show. Since then, the company has managed to rack up very nearly $8 billion in losses moving flat panels to your living room.

The TV business, like PCs, is on a slow, and likely permanent, decline. Viewing is moving to tablets and phones, most especially in emerging markets. None of this means that there isn’t room to sell either any longer. Indeed, PCs and TVs represent a combined 500 million units sold annually at this point and in terms of dollar value, those two industry are bigger than the smartphone business. But the trend is not Sony’s friend here. To grow share in a declining business, you need to be really good at making the item in question. That’s why you’re seeing a powerhouse like Lenovo, which took over IBM’s PC business years ago, grow market share. It’s likely going to propel Vizio — a lean company which relies mostly on price and a deep global supply network — to a dominant position among TV sellers here in the U.S.

Sony was too small in PCs to be the domino that pushes over the stack, but it’s likely the canary in the coal mine. HP nearly spun out its PC business a couple of years ago and almost certainly regrets not doing so by now. Dell has gone private and no longer needs to fear the stock-market hit of lost revenues by trimming back its commitment to that sector. What likely happens is that as replacement cycles get longer still, the market shrinks enough that no one exit feels particularly daunting. Consumers still see some choice and next-generation computers like the Surface Pro from Microsoft fill in some gaps.

The TV business is lagging behind here, but probably not for much longer. Sony says it’s staying in: ”If you are asking if we have any plan to sell off our TV business, I can say we have absolutely no plan to do so right now,” CEO Kaz Hirai said. Of course, who would buy it? Most TV companies are brand names with a bit of R&D money slapped on top of commodity flat panels; you’re not buying a lot of intellectual property. That’s why a Vizio can do with hundreds of people what Sony once needed thousands for. Sharp, Panasonic and Toshiba are all bleeding money in TVs as well and none is in a financial position to float those money losers forever.

Consumers are unlikely to much care. Does anyone miss Mitsubishi or Sylvania TV? Longing for your DEC or Compaq computer? The center of gravity has shifted away and what were once very exciting products have now become things many of us have, but few of us crave. Ask a recent college graduate if they feel the need to have either a PC or a TV in their new apartment and you might be surprised at how few consider those must-own items. Ask them to give up their smartphone for a week and you might find yourself on the wrong end of whatever martial art they took as an elective.

A lot of people get up in arms about these recognitions that PCs or TVs are entering old age. The suddenness with which this happened makes it especially disturbing to those that grew up at a time when one or both was on the rise. Sony rose with them, most especially the television. Now, it’s saying goodbye to computers and moving televisions into a place where it can sell the division or ultimately shut it down. These won’t be the last farewells in either industry.

Follow me on Twitter and on Facebook. Find the rest of my Forbes posts here.

Source: Forbes Apple

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Apple Continues to Depend on Samsung
Apple Continues to Depend on Samsung
Despite previous speculation, Apple still relies on Samsung for the production of the components of its major devices
 
 
Apple Black Friday Deals are on Sale in MacMall Black Friday 2014 Sale
 
 
The Black Friday 2014 Sales You can Shop Today 11/26
The Black Friday 2014 Sales You can Shop Today 11/26
Over 20 Black Friday 2014 sales are already launched. Get the deals early to get your head free for the hard to get Black Friday deals to be released on Thanksgiving Day.
 
 
Target Black Friday Pre Sale launched Online
Target Black Friday Pre Sale launched Online
The Target Black Friday 2014 pre sale is live online offering $100 Gift Cards with iPad Air and iPad mini 3 purchases and many more deals.
 
 
 

Latest from the Network

OPEC decides against oil production cut despite price slump
Viena, Nov 28 (IANS) The ministers of the Organization of Petroleum Exporting Countries(OPEC) decided here Thursday to maintain its output level despite crude oil price fell to a four-year low level. The decision to...
Read more on Business Balla
 
12 killed in bus accident in Egypt
Cairo, Nov 28 (IANS) At least 12 people were killed and three others injured Thursday as a passenger bus overturned into a canal in Egypt's Beni Sweif province, around 120 km south of the capital Cairo, media reported...
Read more on Politics Balla
 
Explosions, gun fire rock Kabul diplomatic enclave
Kabul, Nov 27 (IANS) Two explosions followed by gunfire rocked the diplomatic enclave here Thursday night, a security officer said. The area of the blast is close to the Tajikistan embassy. The incident occurred in...
Read more on Politics Balla
 
Saarc leaders' wives ladies go sight-seeing at Bhaktapur
Kathmandu, Nov 27 (IANS) While the Saarc leaders conferred on regional matters at the tourist resort of Dhulikhel, their wives drove to the World Heritage Site of Bhaktapur to enjoy the sights of the ancient city. The...
Read more on Politics Balla
 
Maria Shriver 'disgusted' by Miley Cyrus's party
Patrick Schwarzenegger's mother was ''disgusted'' by Miley Cyrus's birthday celebrations. Maria Shriver - who, along with Arnold Schwarzenegger, are the parents of the 21-year-old actor - is reportedly ''very worried''...
Read more on Celebrity Balla
 
Kim Kardashian and Kanye West planning nude photoshoot together?
Kim Kardashian West and Kanye West want to do a nude photoshoot together. The couple are reportedly keen to pose naked alongside each other, after the 34-year-old 'Keeping Up With The Kardashians' star recently stripped...
Read more on Celebrity Balla
 
Robert Pattinson put on diet by FKA twigs
FKA twigs has put Robert Pattinson on a diet. The 'Two Weeks' hitmaker - who has been dating the 'Twilight' star since summer - is reportedly so unimpressed with her boyfriend's poor fitness levels that she decided to...
Read more on Celebrity Balla
 
Cate Blanchett 'proud' of Emma Watson
Cate Blanchett is proud of Emma Watson. The 'Blue Jasmine' star has praised the 'Harry Potter' actress for her speech on gender equality for the United Nations (UN) in September this year. Speaking to Porter magazine,...
Read more on Celebrity Balla