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Have you ever woke up in the morning and you just knew it was going to be “one of those days?” That’s how Kazuo Hirai and Mary Barra woke up in completely different parts of the world this a.m. On the other hand, it’s just as likely that neither of them slept at all last night, because they already knew what was in reports that their companies would release this morning. Harai is CEO of Sony (NYSE:SNE). Barra is CEO of General Motors (NYSE:GM). The market has just opened in New York. Sony’s share price has already dropped by more than 4.5%. GM’s share price appears to be trying to qualify for one of the Alpine events in the Sochi Olympics. In the time that it took to type that sentence, it dropped from a 1.9% loss to a 2.25% loss. Yes, it’s going to be one of those days.
For the moment, at least, the Sony share price is trying to recover from that early loss, most of which occurred in early morning, pre-opening trading. What was once the world’s leading consumer electronics company has been fighting for survival since its share price plunged from the $130.00 range in 2000 to the $40 range in less than two years – and that was still six years ahead of 2008! Sony’s success came under attack on multiple fronts. Where Sony excelled, Steve Jobs and other tech genii sought to exceed their excellence, which is just another illustration of the ever-increasing speed of technological advancement.
This morning, Sony simultaneously issued its third quarter earnings report and another that discussed its plans for its TV and PC businesses. The primary weights on the share price were the disclosure that the bulk of the company’s reported gains in sales and net income were a result of the weakened Yen and the company’s own projection that it would end the year with a ¥100 billion loss. Sony had predicted a ¥30 billion profit.
As to the TV and PC business, it appears Sony’s leadership, despite the protests of shareholders, wants to keep its consumer electronics status, but it is venturing on a restructuring program that will include reducing home office expenses (a substantial amount) by 30%. The plan also includes the elimination of 5,000 jobs, 1500 of which will be in Japan. Combined with the 28,000 jobs cut in the last nine years, the company’s work force will be reduced to about 140,000. Product-wise, Sony plans to create a new, stand alone division for its TV business which will specialize in high-end sets. On the PC front, Sony will retain a 5% stake in its waning PC business as it has effectively given it over to Japan Industrial Partners. It might not be too much longer before we say goodbye-o to the Vaio.
I’m not quite as clear about where or when there is going to be a silver lining for General Motors. Once the mighty of the mightiest, GM has continued to flounder, being both walk without stumbling over its own toes, yet having to be agile enough to the competitors who have outrun it. Not only did GM’s profits decline by 13%, had it not been for its business in China, it would have lost $200 million in the fourth quarter.
There are becoming fewer and fewer reasons to buy shares of these former greats, and probably nearly as many reasons to dispose of them. Only time will tell.
If there is going to be a silver lining for Sony, it could China’s new open-door policy allowing gaming consoles to be sold in country.
