Swan Song For Sony?

The company has all sorts of wonderful gear and great ideas. So why can't Sony unify them into one compelling strategy?

The signs are strong for consumer electronics this quarter, but you couldnt tell from the buzz out of Sony. Speculation that the company will lay off about 10 percent of its workforce (after troubling financial results and too much dependence on the PlayStation 2 as its primary revenue source) has prompted some analysts to revive the question, "Will Sony survive?"

Sony as a company is a conundrum of fabulous ideas and missed expectations. The first tape recorders and VCRs that were broadly available and reliable came from that company and, recently, Sony gave us the first robotic pets that were more like pets and less like expensive electronic dolls. Its likely to bring us the first believable humanoid robots as well, but revenues from these efforts are both expected to be trivial.

Sonys laptops are often on the wish list of folks that see them, and its noise-canceling earbuds keep the folks at Bose awake at night, but neither seems to be moving in sufficient volume to give Sony an edge. Its the first company that seems to understand that a todays handheld computer can become tomorrows multimedia player-cum-game system, and it is widely considered to be the best builder of amateur and professional digital movie cameras. However, in each of these businesses other companies are generally seen as dominant.

While Sony wasnt the first to create electronic games for the home, it did redefine the space and still dominates it (although Microsoft is rapidly eroding that dominance). That suggests Sony could become just another Nintendo or Sega over time if it cant keep up competitively in this space. To avoid that fate, Sony must call upon the potential of the entire company, not just the game division.

Theres no other company that drives all four emerging areas of digital entertainment like Sony. Sony is in the living room; in the pocket; at work; and even in the car (the one location that the PC companies dont appear to see). Yet it seems unable to pull the pieces together to drive growth and revenue.

For instance, Sony loses money on every PlayStation it sells but makes that money up on game royalties in what is a razor-and-blade type of market. But consider what happened when Connectix created a viable way to run PlayStation games on a PC (basically offering to cover the cost of the razor another way): Instead of supporting or buying that solution, Sony tried to kill it via lawsuits. The fact that Connectixs software wasnt Sonys proved more powerful than the economic benefits it promised Sony. This not-invented-here problem has plagued Sony for most of its existence.

Or consider the Memory Stick, a powerful technology that—while arguably better than Secure Digital flash memory—is simply not a standard and unlikely ever to be. In a series of events that recalls the failure of BetaMax to capture the home-video market, companies like Hewlett-Packard (which supports all memory types on its flash-enabled machines) are at a market advantage against Sony, which only supports its own. Sony simply seems unable to understand that competitors seldom will support a technology that is controlled by another competitor.

It breaks my heart to see yet another hardworking company fail because executive management cant seem to pull the teams together.

If the Sony executive staff could simply bury their animosity toward each other and work together as a company, rather than fighting the turf wars that plague that company, there is little they couldnt do in a market that is seems to favor the unique and powerful technological products they build. If this executive staff cannot, we are likely seeing the beginning of the end for Sony and will simply remember it as the great company it was and the even greater company it might have been.

Rob Enderle is the principal analyst for the Enderle Group, a company specializing in emerging personal technology.