Sony, which made its name as the electronics company that produced the Walkman portable music player and Trinitron television, is straying further from its roots into real estate. On Thursday, the firm said it’s venturing into the real estate brokerage business in Japan, hoping to create new revenue as it continues to struggle with losses from its flagging consumer electronics businesses.
Real estate is just one of the multiple new businesses Sony is exploring under a project headed by an executive handpicked by Chief Executive Kazuo Hirai, according to company officials.
Under the project, the company will carry out “internal auditions or contests” once every three months where employees can pitch new ideas. The business division that will decide which idea to pursue is headed by Hiroki Totoki, the company’s senior vice president in charge of corporate planning, who is also known for his role in establishing Sony Bank in the early 2000s.
The real estate business was one of the ideas a mid-level Sony manager pitched to Totoki, who liked the idea and proposed to Hirai, according to company officials. The new company–Sony Real Estate Corp.–will start operating from August with capital of ¥250 million ($2.4 million). In addition to brokering property sales, Sony said the firm will also provide consulting services to companies on how to manage their real estate assets. Sony Real Estate will aim to list its shares in three years and target annual sales of ¥50 billion in five years, Sony said.
Weighed by losses from its television and personal computer businesses, Sony itself has been unloading a string of real estate assets over the past year including its former headquarters in Japan and its U.S. building at 550 Madison Avenue. In February, the company said it expects to log an annual loss of $1.1 billion and announced a reduction of 5,000 jobs and the sale of its PC business.
Under the project, the company will carry out “internal auditions or contests” once every three months where employees can pitch new ideas. The business division that will decide which idea to pursue is headed by Hiroki Totoki, the company’s senior vice president in charge of corporate planning, who is also known for his role in establishing Sony Bank in the early 2000s.
The real estate business was one of the ideas a mid-level Sony manager pitched to Totoki, who liked the idea and proposed to Hirai, according to company officials. The new company–Sony Real Estate Corp.–will start operating from August with capital of ¥250 million ($2.4 million). In addition to brokering property sales, Sony said the firm will also provide consulting services to companies on how to manage their real estate assets. Sony Real Estate will aim to list its shares in three years and target annual sales of ¥50 billion in five years, Sony said.
Weighed by losses from its television and personal computer businesses, Sony itself has been unloading a string of real estate assets over the past year including its former headquarters in Japan and its U.S. building at 550 Madison Avenue. In February, the company said it expects to log an annual loss of $1.1 billion and announced a reduction of 5,000 jobs and the sale of its PC business.
Some analysts have been skeptical of Sony’s attempts to generate new sources of revenue, citing for example a lack of direction for its medical equipment business. After the announcement of the move into real estate came out Wednesday, Sony shares also fell as much as 4.1% on the Tokyo Stock Exchange.
Still, Naoki Fujiwara, a fund manager at Shinkin Asset Management, said Sony could use knowhow from its banking and insurance businesses for the real estate business. Sony’s financial arm has been one of the few generators of stable profits, comprising nearly 65% of its operating profit in fiscal 2012.
“The financial and real estate businesses are intricately linked and there isn’t a high risk if Sony focuses on the brokerage services,” Fujiwara said, adding Sony shouldn’t get involved in property development. After becoming chief executive in 2012, Hirai has regularly met with Sony’s engineers and tried to rekindle the company’s knack for cool gadgetry after years of job cuts had lowered motivation for inventing new products.
Still, Naoki Fujiwara, a fund manager at Shinkin Asset Management, said Sony could use knowhow from its banking and insurance businesses for the real estate business. Sony’s financial arm has been one of the few generators of stable profits, comprising nearly 65% of its operating profit in fiscal 2012.
“The financial and real estate businesses are intricately linked and there isn’t a high risk if Sony focuses on the brokerage services,” Fujiwara said, adding Sony shouldn’t get involved in property development. After becoming chief executive in 2012, Hirai has regularly met with Sony’s engineers and tried to rekindle the company’s knack for cool gadgetry after years of job cuts had lowered motivation for inventing new products.
Through regular contests and an internal social networking site to share ideas among employees, Hirai is hoping to unearth creative ideas that might lead to actual businesses, officials said.
Totoki, in charge of selecting the new businesses, is known among bankers as a sharp-minded and speedy decision-maker, and is credited with making Sony’s online banking business successful despite heavy opposition from company executives and government officials at the time.
He is also the author of a popular book called “We Created a Bank – the Inside Story of Sony Bank.” Along with the new chief financial officer Kenichiro Yoshida, analysts and bankers see Totoki as one of Hirai’s key lieutenants leading Sony’s turnaround strategy. Still, a string of new businesses are unlikely to generate stable profits anytime soon and fund managers say fixing its consumer electronics business remains the top priority for Sony. “The electronics business needs a profitable structure and the new businesses can only be something extra,” Fujiwara said.
(Wall Street Journal)
Totoki, in charge of selecting the new businesses, is known among bankers as a sharp-minded and speedy decision-maker, and is credited with making Sony’s online banking business successful despite heavy opposition from company executives and government officials at the time.
He is also the author of a popular book called “We Created a Bank – the Inside Story of Sony Bank.” Along with the new chief financial officer Kenichiro Yoshida, analysts and bankers see Totoki as one of Hirai’s key lieutenants leading Sony’s turnaround strategy. Still, a string of new businesses are unlikely to generate stable profits anytime soon and fund managers say fixing its consumer electronics business remains the top priority for Sony. “The electronics business needs a profitable structure and the new businesses can only be something extra,” Fujiwara said.
(Wall Street Journal)
