Sony Corporation ADRSNE

Morningstar Rating

Stock Research and Analysis

by Michael Holt

Sony has not made the transition from the analog world to the digital world gracefully. Although the company is able to wring value out of a vast media library and established gaming platform, inefficient operations and misguided design efforts in the Read more

Bulls Say

Sony recently announced restructuring initiatives, including layoffs, factory closings, and management changes, that should help address some of the structural cost issues that currently make the company uncompetitive.

Over the years, Sony has demonstrated an ability to excel at product design. Refocusing efforts on software and the user interface could help Sony distinguish its products in the future.

Sony Pictures has an excellent record of producing hit movies, and its short-term pipeline appears to contain several films that should drive successful results.

Howard Stringer recently succeeded in ousting several old-guard executives. This should make it easier to push through restructurings and other strategic changes that have stalled in the past. Read more

Bears Say

Sony may never regain the premium pricing it once enjoyed on its consumer electronics products. Convergence in hardware specifications has narrowed the gap between hardware for high-end and entry-level products.

The banking and insurance operations have material exposure to financial markets. Stress in the markets could offset gains achieved through the electronics business.

Concentration of manufacturing operations in Japan exposes Sony to currency risk. Additionally, the ADR structure exposes investors to currency fluctuations.

Sony's Blu-ray victory could be ephemeral, as the age of hard disks is yielding to video downloads played and shared on PCs and portable devices. Read more

Strategy

Sony has a three-part strategy for the future. First, streamline manufacturing operations, possibly through outsourcing. Second, place greater emphasis on software and user interface design. Third, leverage Read more

Management

We believe that Sony, after years of declining performance, selected Howard Stringer as CEO with the idea that a Western CEO may have a greater willingness and ability to shake things up than a Japanese leader. Although we view this as a step in the Read more

Profile

Sony's largest operations are focused on consumer electronics, but the company also has entertainment, insurance, and chip manufacturing operations. Its electronic products Read more

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