Could everything Sony (except the games division) be d00m3d?

[Chzn8r]

It's really worth it to read this whole thing... open up a few eyes (especially fellow Americans) to the fact that Sony is *not* in fact the God among electronics you may think it is...

Samsung is now what Sony once was
Published: March 13, 2005, 6:00 AM PST
By James Brooke and Saul Hansell
The New York Times
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TOKYO--In 1997, the year Sir Howard Stringer joined Sony, Japan's premium electronics company, it took little notice of the Samsung Electronics, a South Korean television maker fighting a life-or-death battle to survive the Asian currency crisis.

Less than a decade later, Samsung now has twice the market capitalization of Sony, which this week named Sir Howard its chairman.



Nor is Samsung Sony's only rival. Apple Computer now dominates the market for portable music players. Silicon Valley companies have led the way in digital gadgets like handheld personal organizers and digital video recorders. Sony is even facing strong competition from Kodak and Canon for digital cameras, a product category it invented.

Samsung has become what Sony could once claim--the competitor that has both breadth of products and the appeal of a premium brand.

This rapid reversal of fortunes illustrates the highly competitive world of consumer electronics that Stringer, a media man, is entering. Complacency and coasting on best-selling products have contributed to a nearly 75 percent decline in Sony's stock value since its March 1, 2000, peak. The invincible "factory of ideas" founded almost six decades ago by Akio Morita, the company that brought the world the transistor radio, the Walkman and the Trinitron television tube, seems to have lost its way.

"Samsung is now the anti-Sony," George Gilder, an American technology analyst, said here Wednesday. "Sony is layered with bureaucracy. The amazing thing about Samsung is that it is like Apple with Steve Jobs involved in designing the iPod; it is like Sony with Morita deeply involved in developing products."

Samsung has kept a lean corporate structure, with authority increasingly delegated to front-line managers around the world, and almost a quarter of the far-flung staff of 88,000 dedicated to research and development.

But in Monday's boardroom purge, Sony demoted the one engineer credited with developing a new, world-beating product line, the PlayStation game consoles. Ken Kutaragi remains chief executive of Sony Computer Entertainment, but he loses supervision of Sony's consumer electronics and semiconductor business just as it is preparing the Cell Chip, a superchip that is to run the next generation of game machines and also high-definition televisions. With the handheld PlayStation Portable selling like hotcakes since it was released here in December, the next PlayStation is to come out next year, in time to compete with a new Xbox console by Microsoft and a new console by Nintendo.

In the last three years, Sony's electronics division has dragged down company profits. With the division forecasting losses for 2004, Sony is expecting about $1 billion in profits for the year ending this month, about 1.5 percent of revenue of about $69 billion. By contrast, Samsung, in the year that ended in December, had $10 billion in net income on sales of $56 billion. High profits allow Samsung to invest billions in research and development, maintaining 15 laboratory complexes around the world.

"Last year we spent $7 billion in capital spending, the largest for any information technology company in the world," Joo Gwan-Moo, a spokesman for Samsung Electronics, said by telephone from Seoul. This year, Samsung Electronics, the world's largest maker of memory chips, will invest $10 billion.

Samsung also has a huge capacity to build raw components like memory chips and display panels. This investment has given Samsung some of the lowest production costs for items like flat-screen televisions, DVD players and cell phones. Efficient production of flat screens is crucial in a market where oversupply last fall led prices to drop by more than a third. Low cost, stylish design and advanced technology are crucial in a world where the number of producers of DVD drives has jumped to more than 20, from seven in 2003.

Samsung was once a back-of-the-store brand with bulky televisions and boom boxes. After the Asian currency crisis, Samsung upgraded its product lines to compete directly with Sony for the premium market, leaving cheaper electronic goods to new companies in China. After spending $3 billion a year in advertising, including extensive Olympics sponsorships, Samsung's $12.6 billion brand value now rivals Sony's, according to Interbrand, the brand consultancy.

Samsung is such a leader in flat screens that Sony swallowed its pride last year and joined Samsung in building a huge factory in South Korea. With the price of LCD panels quite volatile, executives of both companies said the deal helped reduce the risk.



Jim Sanduski, the vice president for marketing of Samsung's television group in the United States, said that locking Sony into the deal was better than trying to sell excess panels on the open market.

"We would rather have Sony as a captive customer for 50 percent of the output," he said. "Sony will try to sell the products at a premium price rather than some Chinese brand, say, trying to undercut the market."

Sony, for its part, clung too long to its once-innovative Trinitron picture tube technology, and it paid the price at Christmas. In the last quarter of 2004, Sony's television sales rose 5 percent, but profits plunged 75 percent, year over year. No longer able to command the premium prices associated with proprietary technology, Sony increasingly competes with high-volume, low-cost producers.

"I meet many Sony employees here who are so gloomy," Takeshi Oyabu, an assistant professor of Keio Business School, said in an interview here. "Without me saying anything, they say things like 'I am from Sony, whose reputation is very bad.'"

In the United States, however, Sony's brand reputation is far stronger with consumers than it is in Japan or most of the rest of the world.

"My product may be better today in a blind test, but consumers love S-O-N-Y branded on their TVs," Sanduski said.

Sony followed its flat-screen joint venture in December by signing a cross-licensing agreement with Samsung. Valid until 2008, this deal allows the two companies to share the roughly 20,000 patents they hold between them.

In cell phones, Samsung's clamshell designs, clear displays and strong computing power have emboldened the company to set a worldwide 2005 sales goal of 100 million handsets, 16 percent more than last year's sales. Such an increase in sales could pull Samsung close to the industry's second-largest cell phone producer, Motorola, an American company that sold 104.1 million handsets last year.

While cell phones are Samsung's largest business, Sony has stayed out of mobile phones. But in a time of technology convergence, Sony could lose if increasingly powerful cell phone cameras start cutting into sales of digital cameras.

In South Korea, Samsung unveiled on Wednesday the world's first mobile phone with a powerful 7-megapixel camera. By comparison, many digital cameras feature 3 or 4 megapixels. In an example of technological convergence, this high-end handset, SCH-V770, is Internet-capable and has an MP3 player and a business card reader.

"The transistor radio, Walkman, Trinitron tube televisions--Sony created products that changed our lifestyle," Mainichi Shimbun newspaper said in an editorial Tuesday. "We hope to see the introduction of new, Sony-like products as soon as possible."

On Tuesday, Stringer met with Japanese reporters and vowed that Sony would be cool again.

But on the Ginza, Japan's main shopping street, cool migrated a few months ago from Sony's showcase building to the five-floor Apple store. On a recent Sunday afternoon, crowds elbowed each other to inspect the latest iPod designs, using computer terminals to book appointments with Apple's sought-after technical advisers.

When Sony was caught flat-footed with a late introduction of an Internet version of its 25-year-old Walkman, its profits from world audio sales fell a cataclysmic 48 percent in the final quarter of last year. Once again, Sony had coasted on an old technology, while competitors invested in new ones.

"Samsung is like the old Sony," said Gilder, who edits the Gilder Technology Report. "Samsung has much of the spirit of Sony 10 years ago."

[Cless]

From what you say, it looks like Sony are in pretty bad shape. So, it looks like the Playstation is it's saviour. If they didn't even have that, then they would be no doubt in grave danger by the looks of things. Geez, I didn't realize that Sony were in such a bad state.

[Shoden]

the PSP and new playstation will rake in a hell of alot of money i've never heard of this samsung though

[LH]

I have a few years of electronics retail experience dating back to February 2003, and I can say that Sony generally makes better products than any other company, and the article refuses to acknowledge some of Sony's newer technology, especially its DVD cams.

As far as I know, Hitachi and I think JVC are the other two competitors in that market, but Sony's technology is miles ahead of the competition. You can take snapshots straight to the DVD and even mark different sections of your movie in chapters. If I remember correctly, you couldn't do either of those on the competitor's products. Sony's image stabilizer and night vision were also far superior to anything any other company could even dream up, and those functions were usually absent or just plain weak on Samsung's camcorders. As of October (when I quit forever the god-forsaken world of retail) Samsung's camcorders were poorly designed and cumbersome, especially on their innovative models. They combined a hi-res still cam with a digital camcorder but in order to switch from one function you had to shut off the first function and wait for the lens to fully retract back into the body of the camera and wait for the lens of the second to come out. In total it took about 10 seconds for you to switch from video to still mode, not exactly what you're looking for when you want to take a quick "Kodak moment." All Samsung models feature a cheap plastic lens while most of Sony's use the Carl Zeiss lens, a lens so good it's used on the Hubble telescope.

Sony's digital cameras are second to none just like their camcorders. Their entire new line of CyberShots features a 1-second start-up time. I dare anyone to find that feature on a Samsung (which sells its camera technology to Gateway to produce ultra-cheap second-rate digital cameras, I don't know what that guy in the article was talking about when he said that Samsung isn't like that anymore..) or any other brand for that matter. Kodak has taken a large chunk out of Sony's digital camera market because they have been providing new technology and solutions, specifically their EasyShare print system, which is one-upped by another new Sony technology which the author refused to acknowledge. I'm talking about Sony's line of dye-sublimation printers which print higher quality prints than Kodak or Canon's and feature prints which are literally unsmearable and indestructable. I set up a demo in which I challenged anyone in the store to smudge or tear a Sony print. No one could do it because of the coating (I can't remember what the technology is called) they use. Sony's higher end digital cameras also use the awesome Zeiss lens. If you don't think Sony's innovating, look up the model DSC-T1, DSC-U30, DSC-F828 (compare it upon its release date to other technology existent at the time. I'm fairly sure it was the first consumer 8-megapixel digital camera to be sold in a regular market,), or the DSC-P150. There was also another model which combined the T1 and the U30 but for the life of me I can't remember it, but it was definitely new and innovative.

The guy wants to talk about Sony ripping of their old designs, why does he not mention Samsung ripping off Sony's old designs? Because that's exactly what they do with their tube TV's and LCD monitors. It's like they look through a Sony catalog and just imitate the stylish designs. Nothing against Samsung, but they're not in Sony's league in terms of product design and quality. Not even close, I've always thought of them as Sony's little brother. And I know none of you are going to read this but I felt like sticking up for Sony because they have made such awesome, high quality products for so long and they've always been my favorite manufacturer.

[Shoden]

very good point

[Chzn8r]

I'm sorry I made you type all that... I was never doubting the quality of Sony's best products, because their brand name is strong and they make trustworthy equipment as far as cameras and such go. This article is more how Sony is suffering monetary and losing to competition.