"In those good old days, Sony made electronics equipment, three nationalnetworks ruled the airwaves, computers referred to IBM mainframes, and phone companies minded their own business," Idei said in a speech seven months after taking the helm of the Japanese multinational. These days, headded, "it seems that everyone is jumping into everyone else's business, and the old rules are broken."
At the age of 50, Sony is having amidlife crisis. Once dominant in all things electronic, the conglomerate isnow facing the "maturation" of the home entertainment industry, wherewidely available technology and low-cost labor have led to risingcompetition and smaller profits. As a result, Sony is staking much of itsfuture on personal computing, a relatively unknown territory where companiesthat survive more than a year are often considered hardened veterans.
The consequences of Sony's course go far beyond the Spartan hallways of corporate Tokyo. As other Japanese companies follow the industry leader's path, its strategy could presage a new economic war between Japan and the United States, which has long considered the PC market its own. And the move will likely have a significant impact on the technology itself by hastening the anticipated merging of the television set and the personal computer--a convergence that digital soothsayers predict will be felt with Loma Prieta-like magnitude from Hollywood to Wall Street.
With stakes this high, Sony is wasting no time. Barely six months after announcing its plans toenter the PC market in a major partnership with Intel, Sony showed the world its firstbranded personal computer at the PC Expo this week in New York. [See CNET analysis of Sony PC]
A company official also disclosed to CNET that it is planning a notebookthat would bear the Sony nameplate. Lastly--for now--it is considering thepossibility of manufacturing a Network Computer, the Oracle-sponsored boxdesigned primarily for affordable Internet usage at a target price of $500.
A critical mass"The PC is approaching a major stage in its development," said CarlYankowski, president and COO of Sony Electronics. "The consumerization ofthe PC in the United States is finally reaching critical mass."If that's true, it could be a propitious moment in Sony's history. But success is by no means certain. "They're at a crossroads. The brand name of Sony doesn't mean anythingin the PC market," said Kimball Brown, analyst with the Dataquest researchgroup. "On one hand, they have to get in; on theother, I'm not convinced they can."
That seems to be the opinion of many analysts and executives, whosay that Sony has an uphill task in trying to establish itself as amajor player in computers. But few are willing to write off the company,which has led a mostly charmed life--and its timing may prove right again asrecent projections of stagnant PC sales turn out to be exaggerated.Moreover, as the industry shifts its focus from the Internet to corporate intranets, the leading vendors could beleaving someroom for others in the home consumer market.
"They have the brand name and distribution channels," said Linda Kazares, president of Ambit International, a San Francisco-based consulting firm. "The computer industry is too plugged in to thinking that it's selling to other manufacturers. It's a retail market."
And no one does retail like Sony.
Beyond its technological advances, the electronics giant has one weapon in the consumer battle that perhaps even Bill Gates envies: the Sony label.According toa recent LouisHarris poll, Sony is the most respected and recognizablebrand name in the United States, surpassing General Motors, Coca-Cola, and AT&T.
For this reason, the technical features of Sony's first PC may in fact matter less than its brand name; as some would say, image is everything. "They're in a good positionto go out and make a statement with their reputation and brand ID," saidTim Bajarin, president of Creative Strategies Research International inSanta Clara, California.
The first statement seemed somewhat muted at PC Expo this week. Sony's inaugural PC was respectable but notparticularly remarkable, starting with its prosaic name: the VAIO PC, for Video AudioIntegrated Operation. Analysts say the company may have made the name sound deliberately technical to establish credibility in a field for which Sony is not known.
This is not a toy"PC-Man would have made it sound like a toy," said Jan Loomis, managingeditor of industry newsletter Internet Marketing and Technology Report, speculating on what moniker Sony might have chosen in a different world. Still, she says, the VAIO's features seem aimed at the same homemarket that Sony has dominated with entertainment appliances for so long.To prove its bona fides, the VAIO includes a number of competitive features: a 166-MHz Pentium, 16MB of RAM, a 2.1GB hard drive, 28.8-kbps modem, MPEG decoding capabilities, an 8X CD-ROM drive, and a software bundle that includes Internet access. And, of course, a Sony-signature design, in hues of gray or violet.
"This is more of a user computer. It seems to be configured not as aworkhorse but for consumer uses--surfing the Net, doing research, games,word processing, email, things like that," Loomis said of the VAIO,estimated to retail for $2,000 to $3,000. "It's powerful enough, but not outof people's price range."
Sony also designed its computer with the idea of eventually capitalizing on its television technology. A primary obstacle to theconvergence of PCs and TVs is the illegibility of computer text on astandard screen from sofa-viewing distances, something Sony might be able tofix.
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Sony introduces the VAIO PC |
"They have to leverage the television side of things. Who needs anotherstandard 14- or 15-inch monitor?" Brown asked. "You have tocontribute where you have the most advantage: 25- to 55-inch TVs, thingsyou can actually see."
Sony expresses confidence that it can add the PC to its long string ofconsumer successes.This is, after all, the company that gave us the Walkman.
But it is also, others note, the company that gave us Betamax--and refusedto abandon the hapless video recorder even as it was being ridiculed as theelectronic equivalent of the Edsel.
Such stubbornness--to the point of arrogance, some would say--was also seenduring the earlyyears of Sony's foray intothe movie business, a controversial attempt to lock up thehome entertainment market from studio to store shelf that unwittinglyhelped U.S. companies regain the upper hand in technology.
The acquisition of CBS Records in 1988 and Columbia and TriStarstudios the following year soon became an albatross for Sony, which spentmuch energy and capital trying to meld the volatile elements ofentertainment with the traditional sensibilities of a Japanese corporation, arelationship that many characterized as a match made in hell.
Profits began to fall accordingly, dropping 70 percent in 1993 andanother 60 percent in 1994. In a widely publicized report, Sony wrote off$3.2 billion in losses attributed to its movie operation.Back in the blackSince then, however, Sony has started getting things under control, andits numbers were back in the black by the end oflast year. The turnaround hasbeen attributed in no small part to Idei himself, who has reorganized thecompany and taken back control over many of its U.S. ventures.
Now, Idei is turning his attention to the future. If he's decided what kindsof products that future will yield, the Sony president hasn't announcedthem; he has, though, come up with another one of those curiously awkwardJapanese marketing phrases to convey his mission: the "Digital Dream Kids."
"It reflects the happy image of our future customers," he said. "I wantSony to be the kind of company which lets these future customers achievetheir dreams through our products and services. I want Sony's engineers tobecome the Digital Dream Kids, and I myself want to be a Digital Dream Kid."
Yet if these digital kids dream of the TV and the PC becoming a singlepossession as ubiquitous as the Walkman, it may be some time before it'ssafe for them to wake up.
"TV takes the role of the fireplace in living rooms, and the PC takesthe role of an appliance device," said Vic Wheatman, an analyst with theGartner Group. "While it would beuseful for the two to come together, it will be a while before it happens."
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