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Wiring Sony for Cyberspace : In His 15 Months as the Global Giant's New President, Nobuyuki Idei Has Seen the Stumbling Company Recover Its Footing, Boost Profits and Regain Tight Control of Its U.S. Operations. But Can He Meet the Challenges of the Digital Age?

June 23, 1996|Gale Eisenstodt | Gale Eisenstodt is former bureau chief in Tokyo for Forbes magazine

Nobuyuki Idei, president of Sony Corp., is in a bad mood. He is 15 minutes behind schedule, and the last place he wants to be, it seems, is in a private parlor of an elegant but charmless French restaurant in Tokyo, having to explain the future of his company. Fifty-eight years old, Idei has a boyish face that seems incapable of masking his emotions. At the moment, the muscles around his jaw are tense. The marketing man in him aims to please, but he seems acutely aware that his every utterance will be scrutinized.

When Norio Ohga, now chairman of Sony, selected Idei as his successor 15 months ago, he bypassed 14 other executives--a startling move in hierarchical Japan. Overnight, Idei went from obscure salaryman to Japan's most watched executive. Known within Sony for his free-wheeling intelligence and unusual directness, Idei hadn't even been viewed as a dark horse candidate. For the previous five years he was responsible for Sony's public relations and advertising, and headed the company's product design center, a prestigious position but not one that anyone expected would get him to the top.

To gain support for his decision, Ohga visited Akio Morita, Sony's revered co-founder, in Hawaii, where he was recuperating from a stroke. 'You are a journalist so it is very difficult to tell you this story," says Ohga. "I know that I should probably say that Mr. Morita agreed, but he couldn't speak. The truth is I couldn't tell whether he understood me or not. I really wanted Mr. Morita's agreement."

Inside Sony, employees reacted to Ohga's announcement with exclamations of "Uso," a Japanese expression that means "You're kidding'--said with an emphasis on the "u" and the "o" for maximum impact. When Ohga informed Sony executives about his choice, "nobody thought Idei could do the job," he now admits. "Nobody had thought of Idei in that way before."

The reaction of Japanese and Western business analysts, though, was more hopeful. Sony, they all agreed, needed to make a radical change. Soon after the Idei announcement, Sony reported its first loss ever, a staggering $2.8 billion for the fiscal year 1995. Sony's purchase of Columbia Pictures and TriStar Pictures (renamed Sony Pictures Entertainment) in 1989, the company's much-publicized foray into the movie business, had been a source of embarrassment; now it was proving to be a huge financial drain. In the fall of 1994, Sony had announced that it was taking a $2.7-billion write-down on studio assets. (Plus $510 million in operating losses.)

Even more humiliating, Sony's competitors were beating it to market with more innovative products. Founded 50 years ago, Sony had long been the emblem of Japan's postwar success. It was co-founder Masaru Ibuka who realized the enormous potential of the transistor, a product that had been invented at Bell Laboratories. By coming up with even smaller, sleeker and hipper products such as the pocket radio and the Walkman, Ibuka and Morita transformed Sony into the star of the analog age. But entering the digital age, Sony--like Japan itself--was now beset by problems, weighed down with bureaucratic bloat and curiously out of step with the rest of the world.

When a nervous young waiter brings gin and grapefruit juice instead of a ginger ale with grapefruit juice, Idei glares at him. Neither of his two aides dares to inform him that it was he who had given the wrong drink order. A devotee of health fads and golf, Idei is thin and fit. Since becoming president, he has made sure to set aside time for exercise and regular massages. It's his face that has changed the most--it's heavier. Although he rarely raises his voice, it is easy--as the waiter found out--to tell when he is angry. In meetings he makes his irritation known by sliding his chair back and forth.

The fact is, Idei's first year has been remarkably successful. The company is profitable again. For the fiscal year that ended in March 1996, Sony's sales increased 15% and profits were $512 million, a dramatic improvement. He ousted Michael Schulhof, head of Sony Corp. of America, giving him direct control over--among other things--Sony Pictures. And although the Hollywood operation still has a long way to go, it's once again showing a profit. Idei, says Joseph Osha, an analyst for Merrill Lynch in Tokyo, has proved to be "very aggressive. He's not afraid to make tough decisions."

Idei has also begun to articulate a vision for Sony in a world where consumer electronics products are converging with computers. Sony, Idei insists, will be the brand for the digital age. He likes to refer to his staff as "digital dream kids," spurring them on, he hopes, to create a new generation of entertainment products. Last fall, Sony announced that it was teaming up with Intel to make personal computers for the home.

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