Sorry about the long post...
Sony still a laggard in
PCs
By Jim Davis and Brooke Crothers
Staff Writers, CNET News.com
October 29, 1998, 6:00 p.m. PT
update After more than two years in the U.S.
consumer PC market, Sony is still trying to
find the secret of success.
Although the Japanese electronics giant has
recently seen an increase in notebook sales,
its Vaio desktop line is languishing--or not
even present--on U.S. shelves.
More important, PC business shortcomings
compound larger financial problems at Sony,
which said yesterday that it expects to report
operating losses for the first time in six
years.
A random survey of major computer retailers
across the country reveals that the Japanese
company is not keeping up with major U.S.
players. For example, the company
introduced new desktop systems earlier this
month, yet retailers won't have the systems
until some time in mid-November.
Large retail stores continue to press
traditional brands from Compaq Computer,
IBM, and Hewlett-Packard (HP), and Packard
Bell-NEC at the expense of the stylish mauve
computers from Sony.
"Retailers are coalescing around boxes that
sell well," said Bruce Stephen, a PC market
analyst with International Data Corporation,
and this doesn't include Sony in most cases.
When the company launched its PC line in
April of 1997, Sony was poised to grab a
significant share of the PC market by
blending its strengths in consumer
electronics with personal computers. But that
potential never became reality.
Moreover, Sony's strategy of selling
consumer electronics devices tied to a PC is
threatening to marginalize the company even
further in the hyper-competitive retail
environment.
But Sony says it has a studied, deliberate
strategy of establishing the Sony brand name,
according to Ken Omae, vice president of
marketing at Sony. He says bluntly that Sony
has no intention of selling "stripped down"
PCs but rather is trying to appeal to a more
sophisticated audience. Sony's "convergence"
strategy is targeting products "which link
audio-visual with IT [information
technology]," Omae says.
Omae points to a $2,299 PCV-E308DS Vaio
model that features an "i.LINK" FireWire
IEEE-1394 connection technology for
linking up with Sony Digital Handycam
camcorders for creating movies and "S-Link"
technology which allows users to control
Sony CD Changers and MiniDisc Decks to
edit and record customized MiniDiscs.
But Sony will have to get these systems in
front of more customer's faces to have an
impact. Sales representatives at PC Mall
report that no Sony desktops are in inventory
and that the company isn't keeping up with
other companies that are offering newer,
faster systems already.
Calls and in-store visits to a Circuit City,
Best Buy, CompUSA, and New York-based
J&R Music and Computer World reveal that
few Sony desktop PC models are available to
compete against other brands, and sometimes
then only outdated PCs at that.
The only model offered at Circuit City's San
Francisco store is one with an aging,
first-generation 266-MHz Celeron
processor. Compaq and others are now
offering systems based on the faster,
second-generation Celeron chip. A Circuit
City store in San Mateo, California, carries
no Sony models but more than a dozen
Compaq, HP, and IBM computers in total. A
representative did say the store was awaiting
delivery of new models coming in November,
however.
On CompUSA's online site only one Sony
consumer desktop model can be found. Also,
a CompUSA sales representative in a San
Bruno, California, store said that Sony PCs
were being deemphasized. A visit to the store
revealed a raft of Compaq, IBM, and HP
models and one aging Sony model pushed off
into the corner.
Retailers such as Staples carry mostly
Compaq, IBM, HP, and Packard Bell lines.
Office Depot carries only HP and Compaq,
according to the company's Web site.
Omae says Sony targets stores like Best Buy
which emphasize audio-visual consumer
electronics.
But Sony's problems in the computing
business stem in part from a slow-burn
strategy of establishing a brand first and sales
later. "We are not
planning to make
profits out of
hardware sales," said
Kunitake Ando, head
of Sony's PC business
unit Information and
Technology, in July at
the Windows World Expo in Tokyo.
Unfortunately, the strategy may be working
all too well. "Sony's goal is not to generate
market share but to figure out convergence,"
IDC's Stephen noted.
"It is a live [convergence] integration
exercise. The danger is that they get boxed
out eventually by the 'superbrands'" such as
Compaq, IBM, and HP, he added.
How much longer the company's
experimentation with convergence will last is
anybody's guess, but financial hardships at
company headquarters may soon play a
factor. Sony expects a loss of $313 million
for the second half of its fiscal year ending in
March.
Sony pinned some of the blame on price wars
for products such as computer displays,
mobile phones, and semiconductors to tough
competition from other Asian manufacturers,
who slashed prices as their currency
valuation slumped.
While the PC unit wasn't singled out as a
contributing factor, Sony may have to start
looking at cutting underperforming
operations with predictions of a continued
sharp drop in earnings and revenues for the
next six months.
"Sony seems to have history of taking time
with product refreshes. Whereas other
vendors offer new models every two months,
Sony refreshes its lineup every four months
or longer," said Cameron Duncan, an analyst
with retail market research firm ARS.
Retailers make money by selling large
volumes of systems, and the result of not
making systems at the right price points at
the right time can result in waning enthusiasm
for a product.
To be fair, Sony has started to enjoy some
success in the notebook market. It's ultra-thin
505-series notebooks and its mainstream
slim notebooks have been selling well,
retailers and analysts report. But there too
the company faces stiff competition from
vendors who are increasingly eyeing the
growing market for consumer notebooks
such as IBM and Compaq.
In the desktop market, the company is not a
player in the low end of the market where
boxes are selling best, said IDC's Stephens.
The bottom line is that "Sony just doesn't
have configurations that are enticing
computers that will entice buyers," Duncan
said.
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