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Sony promotes Kazuo Hirai to succeed CEO Howard Stringer

February 02, 2012|By Alex Pham and Ben Fritz, Los Angeles Times

Kazuo Hirai, whose 28 years at Sony Corp. steeped him in the gaming and music businesses as well as the consumer electronics side, has been appointed the struggling company's next president and chief executive.

Hirai's promotion is effective April 1, the beginning of Sony's next fiscal year. The 51-year-old executive will succeed CEO and President Howard Stringer, who will remain as chairman.

Hirai joined Sony in 1984, fresh out of college. His first job was as a junior marketing executive at a joint music venture owned by CBS and Sony in Japan. Hirai moved to Sony's computer entertainment division in 1995, the year after the company launched its first PlayStation game console. Hirai has been leading the Japanese company for the last few months in all but name.

The move comes at a critical time for Sony. Fierce competition for low-cost manufacturers in Korea and China have eroded profit margins for its flagship television business, while consumers have abandoned Sony for smartphones and tablets produced by rival Apple Inc.

Last year, further misfortune struck Sony as hackers infiltrated its computer servers, wreaking havoc with millions of confidential customer profiles. A massive earthquake last March triggered a tsunami that ravaged Sony's home market of Japan, and tropical storms later in the year damaged its factories in Thailand and elsewhere.

The disasters led the company in November to project a $1.2-billion loss for its current fiscal year ending March 31, reversing a $769-million gain it had projected before the catastrophic storms. Sony is set to report its financial performance for its December quarter Thursday morning. This would mark the fourth consecutive year of losses for the Tokyo company.

In most if not all of these instances, Sony leaned on Hirai to present the bad news to its customers and investors.

To outsiders, it may have looked as if Hirai had been acting as the fall guy. But Sony's decision to elevate him to the top post indicates that the company's board approved of his performance and believes him to be the right person to lead the company in a time of crisis.

Founded in the midst of post-World War II Japan in 1946 as a telecommunications company, Sony became a global powerhouse starting in the late 1960s when it introduced its Trinitron color television. It followed up with its Walkman music players, which became ubiquitous. Sony's engineers also helped develop the first compact disc format.

But the company has struggled in recent years to keep up with lower-cost TV manufacturers such as Vizio Inc. of Irvine. Apple's iPods, introduced in 2001, quickly supplanted Sony's dominance in music players, and its iPhones and iPads have become the world's most sought-after devices.

To succeed, Sony needs to more closely align its entertainment business with its consumer electronics operations, analysts said. The company gets 8% of its revenue from Sony Pictures and 6.4% from Sony Music Entertainment.

"The biggest challenge for Sony is to more expertly apply its insights in music, movies and video to its overall strategy," said Richard Doherty, director of the Envisioneering Group, a consulting firm in Seaford, N.Y. "Sony has the content and the studios, and that should give them more insight than anybody else. It's on Kaz's shoulders to build a team to make that happen."

With Stringer handing over the chief executive reins to Hirai, Sony's Hollywood movie and television studio in Culver City will be losing its biggest advocate atop the corporate parent.

Stringer, who spent most of his early career in the television business at CBS, has deep ties to Hollywood and enjoys a strong relationship with Sony Pictures Chairman and CEO Michael Lynton and the studio's creative chief, Co-Chairman Amy Pascal.

Hirai, meanwhile, started his career in music and has spent most of his career in Sony's video game division. Though he has a long-standing relationship with Lynton, Hirai has no background in film or television and is not as well-known a figure on the studio's lot as Stringer.

Although Stringer will remain Sony Corp.'s chairman, Hirai's rise to the top operational role in April is sure to increase speculation about Sony Pictures' future. For years, many Hollywood observers have questioned whether the studio's corporate parent might sell or spin off the entertainment assets once Stringer no longer runs the company or retires. Sony Corp. has been in the movie business since 1989, when it acquired Columbia Pictures, which remains the studio's primary film label.

Sony Pictures has been consistently profitable since Lynton took over in 2004, yet efforts to more closely integrate the studio's content business with other parts of Sony have borne little fruit, with the notable exception of the high-definition Blu-ray disc format.

Like all Hollywood studios, Sony Pictures has cut costs by laying off staff, reducing its producer deals and consolidating some operations in the last few years amid economic pressures caused by the declining DVD market.

The studio is poised for a high-stakes summer with several big-budget pictures to be released, including "The Amazing Spider-Man," "Men in Black 3" and "Total Recall."

alex.pham@latimes.com

ben.fritz@latimes.com

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