Top News 5 Page  1    Sony under Close Scrutiny; Can the Company Regain Strength in its Technical Capabilities?   | FEB. 1. 2005 | Nobuyuki Idei, chairman and Group CEO of Sony Corporation    Nobuyuki Idei, Chairman and Group CEO of the Sony Corporation is sometimes heard complaining that Sony shareholders are difficult and cannot be satisfied with operational performance that is at a level that is on par with those of other companies. Sony's shareprices have continued to seesaw ever since last summer as investors are keeping a strict eye on Sony.    Sony's business performance as compared with major Japanese electronics manufacturers is not all that bad. The company's current net profit for the first half year (cumulative total for April to September) of FY2004 was at 76.4 billion yen, 2.2 times that of the same period last year. It surpassed the current net profits of Matsushita Electric Industrial Co., Ltd. (56.2 billion yen) and Hitachi, Ltd. (41.1 billion yen) for the same period. Furthermore, according to the outlooks customarily published by Japanese companies, Sony's forecast of its current net profit for this fiscal year is 110 billion yen, which is higher than the forecasts of any other electronics company in Japan. Defeated by Competitors in Electronics, Sony's Main Line of Business    Regardless of the above, many analysts give a negative evaluation of Sony's performance. "No dynamism felt," they say, "Uncertainty about its future," they add. The reason behind this is the fact that the electronics, which is Sony's main line of business, is showing sluggish growth. With the boom in digital consumer electronics, competitors such as Matsushita achieved significant increases in profit. However, this was not the case for Sony's electronics division which posted not only a fall in profits but also a 7 percent year-on-year decline in sales for the Japanese market. Sony's profits are moving favorably through increased profits in the movie division generated by the blockbuster hit, Spiderman 2, as well as the excellent condition of its financial services division. The group is seen as having been defeated by the competition in electronics that is Sony's main line of business.    In the past, Sony was perceived as being a company that excelled in technical power. This was what created the "Sony brand premium" and what pushed its sharevalue up. Sony today, however, is not displaying any competitive edge in digital consumer electronics technology. Aiming to Regain a Competitive Edge in Next-generation Technology    In the field of consumer videocassette recorders, Sony's betacam format lost out to Matsushita's VHS format. In the field of video discs, its format was overwhelmed by the Toshiba Corporation-Matsushita alliance's DVD format. Through these two defeats, Sony tumbled from its position as a top manufacturer of consumer recorders and became simply "one of many others." Furthermore, the company became complacent with its success in cathode-ray tube (CRT) televisions and neglected making anticipatory investment towards flat-screen displays. As a result, Sony is unable to manufacture neither liquid crystal display (LCD) panels nor plasma display panels (PDP) on its own. It has to resort to depending on others to supply them to Sony, making it difficult for the company to demonstrate original technological capability. As a result of such setbacks, Sony lost its premium value as a brand, betraying the expectations of investors.    Sony is currently making efforts to regain its competitive technological edge. Blue-ray disc (BD), a next-generation DVD standard, is a driving force. Sony is also in the world's forefront in the development of organic light emitting diode (OLED), also known as organic electroluminescence (organic EL), for which there are high expectations placed as becoming a next-generation flat-screen display. However, it is thought that two to three years will be necessary before products adopting such next-generation technology will become a mainstream item on the market. In the meantime, Sony will have to compete as a company that is "one of many others" without a premium as a brand.