If you think that vanguard electronics manufacturer Sony actually makes its money off of its electronics, there are a few business experts who would like a surprisingly edifying word with you.
It turns out that not only does Sony not make its money off of the electronics it manufactures, but that it in fact loses money on "almost every gadget it sells," according to a new report by the New York Times.
Although Sony may be best known as an electronics entity that boasts such seemingly beloved machinations as its PlayStation game consoles and television sets, the truth is that the company really makes its money from the films/music it produces/distributes.
There are those doomsayers out there who, as the New York Times points out, even believe Sony should give up on the electronics business altogether.
"Electronics is its Achilles' heel and, in our view, it is worth zero," Jeffries consumer technology analyst Atul Goyal wrote in a revealing report this week. "In our view, it needs to exit most electronics markets."
Though it may seem downright silly to many that the company that brought us the Walkman would now be faltering in its electronics output, it seems (in addition to its films and music products) Sony actually makes quite a substantial portion of its profits from none other than the insurance business.
In fact, selling insurance is the most successful branch of the Sony company. Life insurance alone netted Sony 933 billion yen ($9.03 billion) over the last decade (ending in March 2013), making it thee biggest moneymaker for the electronics company that apparently does far more than make electronics.
Sony may not sell life, auto or medical policies in Europe or the U.S., but it's making a killing (pardon the pun) via selling insurance in Japan.
Meanwhile, over that same decade that Sony saw a loss of $8.5 billion from its electronics division, the company took in $7 billion from creative works such as the award-winning Zero Dark Thirty and Spider-Man films, as well as musical recordings from the likes of cellist Yo-Yo Ma and French electronic duo Daft Punk.
"The problem is that the board is still absolutely focused on fixing electronics," Kouji Yamada, a research director of (investment company) Mission Value Partners and a visiting professor at Hitotsubashi University in Tokyo, said.
The New York Times went on to explicate upon the even more surprising revelation that Sony's chief executive, Kazuo Hirai, has stated that the company is indeed considering a proposal from hedge fund Third Point's Daniel S. Loeb, who believes the company should "spin off to raise cash to resuscitate its electronics business."
There are those, however, who argue there's no point at all to Sony bothering to revive its electronics division. Sony still struggles to make a dent in the smartphone realm and even its camera and game console divisions are lately faltering in comparison to those of other companies that seized the day some time ago.
So why can't Sony just try to continue making music and movies while selling insurance in Japan and still go after the electronics market it seems determined to stay a major player in? According to Yamada (who's not alone in his estimations), there just might not be enough managerial attention the company can invest in all of these endeavors at once.
"Maneuvering three completely different industries, that's too much," Yamada said. "These should all be separate companies."
Yamada even went as far as suggesting that since Sony is making so much of its money from film production, and since the bulk of these films are made in the U.S., it's becoming outright foolish for Sony's board to sit in Tokyo, which is on the other side of the world from where the fast-moving Hollywood machine is chugging along at a rapid pace.
Regardless of Yamada's and allied opinions of likeminded analysts, Sony seems staunch in its resolution to stick with electronics as a viable means of ushering in profits for reasons that seem to be, if nothing else, a matter of heritage and tradition. Not to mention the fact that Sony's highly-rated Xperia Z smartphone and RX1 camera may bring in the boon the company's electronics division needs to keep afloat.
"Electronics has a future. And it is in Sony's DNA," Hirai said. "It is my mission to revive it."
Hirai may not be the only one who believes that Sony's past history may be an unlikely portent to what the future holds for the company's electronics future.
"Not so long ago, we had despaired at Sony's ability to ever again produce stellar products," Tokyo-based technology analyst at Macquarie Securities Damian Thong said.
"Yet we now have had a consistent run of beautifully designed, technologically advanced, class-leading products. We think these products hark back to Sony's glory days."
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