[Company analysis] Sony Corporation (ソニー)

 

「Sony Corporation (ソニー)」is a leading Japanese electronic product manufacturer. Currently, they are expanding into CMOS image sensors, games, hardware, movies and music fields, and their business fields even includes entertainment and finance business. It has the largest number of group companies among Japanese companies (1,733 companies) as of 2018, which is more than 400 companies more than「Hitachi, Ltd.(日立製作所)」. The number of consolidated employees is approximately 114,400.

 

1. Company Profile

2. Summary and Features

3. Major Business

4. Financial Information

 

 

 

1. Company Profile

 

※Unit is JPY million, as of 2019

Company name	Sony Corporation
Company name (Japanese)	ソニー
Date of establishment	Tuesday, May 7, 1946
Headquarters location	〒108-0075 東京都港区港南一丁目7番1号
Capital	874,291
Consolidated sales	8,665,687
Consolidated operating profit	894,235
Consolidated total assets	20,981,586
Consolidated capital	4,434,690
Capital adequacy ratio	21.1%
Consolidated number of employees	114,400

 

 

 

2. Summary and Features

 
「Tokyo Telecommunications Engineering Corporation(東京通信工業株式会社)」which was founded in 1946 by Ibuka Masaru(井深大) and Morita Akio(盛田昭夫), is the beginning of「Sony Corporation」. At the time of the establishment, their main business was repairing radios and manufacturing vacuum tubes and voltmeters. From 1950, they developed Japan's first tape recorder, and in 1955 they launched Japan's first transistor radio. From this time, they have put the trademark of "SONY" on the product for export purpose. And, this transistor radio became a big hit, and the name of "Sony" gained considerable popularity overseas, so as of January 1958, the company decided to change its name to「Sony Corporation」.

From 1960, they set up a local subsidiary in the United States to start direct sales activities. Then,「Sony」released  the world's first video tape recorder(VTR) in 1986, a home-use all-transistor VTR in 964, a video camera in the latter half of the 1970s, and a portable cassette player in 1979. They continue to launch mega hit products such as "Walkman", eventually they became the world's largest manufacturer of electrical products.

At the same time, since the 1960s, they started to expand their business into other fields as well as the above electronic products. 「Sony」also started asset management business or record business in a joint venture with「CBS」, and in 1975, they also started a battery business with a joint venture with「Union Carbide」. Even after the end of joint venture with「Union Carbide」, this company continued the battery business, and eventually developed a lithium ion battery, and succeed in commercialization.

In 1979, they established「Sony Prudential Life Insurance Co., Ltd.(ソニー・プルデンシャル生命保険)」and this is the predecessor of the current「Sony Financial Holdings Inc.(ソニーフィナンシャルホールディングス)」 In 1989, they bought「Columbia Pictures Entertainment, Inc.」 and entered the movie business. In 1993, this company started a company called「Sony Computer Entertainment Inc.」and started the home video game console business.

Since the 2000s, the competition in home appliance market became harsh, due to the appearance of Korean and Chinese home appliance manufacturers. In particular, Sony's TV business has been in the red for ten years in a row. At the time of Subprime mortgage crisis in 2009, 「Sony」experienced a very sharp drop in sales of TV, camera, and PC. Since then, they decided to retreat from unprofitable business such as PC. As a result, they are now able to generate stable profits.

Currently, Sony has very large sales in the field of games and network services owing to "PlayStation", and the operating income is extremely high at 15%. Businesses other than the game network are diversifying, and the sales balance between the businesses is evaluated to be fairly good. In the TV business mentioned above, they are focusing on high-value-added products and increasing profit margins.

But the problem is the mobile business. The smartphone business of「Sony」which is represented by "Xperia" is less competitive than other companies. Obviously, their domestic market share is is lower than「Apple」,「Sharp」,「Fujitsu」and even「Samsung」. At a glance, it is unreasonable and absurd decision that they keep their smartphone business going. However, the clear reason is because of technology for 5G.

In the semiconductor business,「Sony」specializes in image sensor semiconductors and has the world's top share(about 45%). This is significantly higher than 21% of「Samsung Electronics」, which has the second largest share in the world in this field. In order to make this position even more solid, they decided to invest approximately 1 trillion yen in this image sensor field for three years from 2018.

Another advantage is that「Sony」has a very stable financial status. In the past Subprime mortgage crisis, despite the sluggish performance of Sony's electronic business, the financial business and stock management business based on a stubborn financial base, produced good results. With such a financial base, Sony is evaluated as having the ability to continue challenging new businesses.

 

 

 

3. Major Business

 

■ "Sony Home Entertainment"
TV, video, audio, digital camera related business. It is a traditional business of「Sony」and is famous for its advanced technology and design such as "camcorder" and "Walkman".

■ "Sony Mobile Communication"
They handle the smartphone and internet related business.

■ "Sony Interactive Entertainment"
They are currently developing a platform business centered on "PlayStation 4". Through this PlayStation network, they provide not only games but also movies, music, TV, and other services. It is the most profitable division for Sony Group.

■ "Sony Pictures"
This company has a studio in Los Angeles, USA, and handles all entertainment-related departments such as movie and TV program production and distribution.「Columbia Pictures Industries, Inc.」,「Screen Gems」,「TriStar Pictures」,「Sony Pictures Animation」,「Sony Pictures Classic」are included in Sony group.

■ "Sony Music"
As a comprehensive entertainment company, they are diversifying into content businesses such as animation and game characters, solution businesses, and live businesses, with a focus on music.

■ "Sony Financial"
Through "consulting" by "Lifeplanner", 「Sony Life Insurance」which provides customized insurance.

 

 

 

4. Financial information

 

※Unit is JPY million

		2016	2017	2018
Consolidated sales		7,603,250	8,543,982	8,665,687
Consolidated operating profit		288,702	734,860	894,235
Consolidated total assets		17,660,556	19,065,538	20,981,586
Consolidated net assets		3,135,422	3,647,157	4,434,690
Breakdown of sales	Game & Network service business	1,649,799	1,943,812	2,224,622
	Music business	647,658	799,995	795,025
	Movie business	903,129	1,011,067	985,270
	Home entertainment & Sound business	1,039,004	1,222,733	1,154,533
	Imaging product & Solution business	579,633	655,892	661,304
	Mobile communication business	759,145	723,742	487,330
	Semiconductor business	773,123	850,010	770,622
	Finiancial business	1,087,504	1,228,377	1,274,708
	Others	450,450	407,174	299,806
	Adjustments	-286,195	-298,820	12,467