Sony names head of US unit as chairman

Sony named the British-born head of its US operations, Howard Stringer, as its new chairman and chief executive yesterday, a rare move for a major Japanese company to give its top post to a foreigner.

Sony's board agreed to appoint the 63-year-old Mr Stringer at an extraordinary meeting in Tokyo yesterday morning. Current CEO Nobuyuki Idei, 67, will step down to take responsibility for slumping earnings after five rocky years at the helm.

Mr Stringer, a former TV journalist, will face the difficult task of boosting profitability at Sony, a sprawling conglomerate whose core electronics division is in danger of falling into the red for a second straight financial year in 2004/05 amid tough price competition and a lack of hit products.

A native of Wales who holds dual British and US citizenship, Mr Stringer will become the first foreigner to run Sony, a company established by engineers in 1946 as a maker of telecommunications and measuring equipment following the end of World War II.

Under Mr Idei's watch, the inventor of the Walkman has been outmanoeuvred by rivals Sharp and Matsushita Electric in flat panel TVs and has lost its lead in the portable music industry to Apple and its popular iPod player.

President Kunitake Ando will also lose his job as part of the major management overhaul. He will be replaced by Ryoji Chubachi, an executive deputy president currently in charge of electronics parts and production operations. Mr Chubachi will also serve as CEO of the electronics business worldwide.

Shares of Sony were up 1.75 per cent at 4,080 yen in early afternoon trade, boosted by hopes for the new management. The benchmark Nikkei average rose 0.62 per cent.

"It looks like the rainy, cloudy weather that's been hanging over Sony could turn sunny," said Kazunori Ohtomo, senior fund manager at STB Asset Management.

"Up until now I haven't really been paying much attention to Sony's stock but now I will be watching the issue closely," he said.

Sony said the management transition would begin immediately but that the changes would become official on June 22, subject to approval at a general shareholders' meeting on the same day.

Ken Kutaragi, known as the father of the PlayStation game console and thought to have been a candidate for the top job at Sony, will resign his spot on the board and lose his position as executive in charge of semiconductors and home electronics.

Mr Kutaragi will remain atop the game division and take on the new title of Group Executive Officer on April 1, Sony said.

Mr Stringer will no doubt face comparison with Carlos Ghosn, the Brazilian-born head of Nissan Motor Co. who raised the bar for foreign executives in Japan by saving the auto maker from near failure with aggressive job cuts and bold reforms.

"Considering that Stringer has been in charge of the US and he is a contents man, his appointment comes as a bit of a surprise," said UFJ Tsubasa analyst Kazuya Yamamoto.

"But it appears that Chubachi will take the lead in bolstering the electronics division, which has to be Sony's main concern."

Sony is more than halfway through a three-year restructuring plan in which it aims to reduce fixed costs by 330 billion yen ($3.15 billion) by rationalising production, streamlining procurement and cutting jobs, but profit margins still remain razor-thin.

In January Sony slashed its operating profit estimate for this business year by 31 per cent, citing sharply falling prices of televisions, DVD recorders and other key products and weak demand for chips.

The downward revision was the latest blow to investor confidence in management, still reeling from the "Sony Shock" in April 2003 when it unveiled a $1 billion quarterly loss that triggered a two-day, 25-per cent slide in the company's shares.

Mr Yamamoto said it would be impossible for Sony to reach its goal of an operating profit margin of 10 per cent in the business year to March 2007. The company is forecasting a margin of 1.5 per cent in the current financial year.

"We could see new management come up with some new targets for the next two or three years," Mr Yamamoto said.

Mr Stringer, currently head of Sony of America and vice-chairman in charge of the company's entertainment business division, had a 30-year career as a journalist, producer and executive at Viacom's CBS television network.

He joined Sony in 1997. Known for his skills as a deal-maker in the entertainment industry, Mr Stringer oversaw the acquisition of Hollywood film studio Metro-Goldwyn-Mayer by a Sony-led group last year.

He became a US citizen in 1985.