Starting to Think Differently About Sony

It’s been a long time since we took a serious look at (or even thought much about) Sony stock (NYSE: SNE - $26.51). We know they have bit of a history as a “value trap” but there is certainly some potential for valuation improvement and higher stock prices if the company can start doing some things right and maybe even innovate again. A few recent things have coalesced in our mind after walking through a fairly large retail computer store here in Paris.

1. They have recognized and seem to be ready to embrace a consumer revolution in 3D computing that will demand new displays and media centers. Sony hasn’t been a technology leader in consumer entertainment for some time but they may have a chance to at least catch up a bit if they apply themselves to the right areas. We think 3D is one such area and the new CEO of Sony has recently gone on record as saying they were committed to mainstream consumer 3D displays by the end of 2010.
2. Moving away from “crapware.” Recently Sony did a deal with Google (GOOG) to pre-load their Chrome browser on their Vaio laptop line. We don’t yet know what the resulting software footprint will look on the Vaio post-Windows 7 but in the past Sony laptops were so full of “free extras” that the machines could barely be used and hours would be spent removing and disabling all these extra “features.” Combined with a very high price relative to other brands, most people stopped even considering a Sony Vaio a few years ago.

During a quick survey of laptops on offer at the FNAC La Defense, we were surprised how well positioned the new Sony Vaio line was relative to the myriad competitive offerings on display. In fact, within the standard laptop lineup, there were no competitive offerings that were close. Most vendors, including HP (HPQ), are using the same ugly and uninspired design one would find three or four years ago. (No wonder Apple (AAPL) keeps gaining share in laptops.) The Sony Vaio line, however, had the design, keyboards, size ranges and quality features at the same (or very close) pricing of the generic, pretty mediocre competition.

We watched about a dozen serious shoppers survey the offerings and the four different Vaio offerings were the ones that all but one settled on. Of course this is wildly and purely anecdotal and doesn’t include many offerings from Lenovo (LNVGY.PK) or Dell (DELL) because FNAC doesn’t sell them. However this is about starting to think differently about Sony rather than a market analysis.

On the netbook side, we didn’t see a Sony offering. The best quality devices in that category appeared to be the Samsung (SSNLF.PK) and the Toshiba (TOSBF.PK) by a good margin. The other 10 or so devices looked traditional, identical and a little cheap. (I’m typing this on an Eee PC which I love but am already ready to trade up.)

On the desktop side a new tier has appeared at the low end. They feature the Nvidia (NVDA) ION platform and the Intel (INTC) Atom processor at prices that start just above 200 Euros. They bump into the next 300 Euro class of AMD-based machines and then things get more traditional with Intel-based desktop machines in the 500-999 Euro range. As one might expect there are a few more boring places in the Informatique section than the desktop aisle.

I’ll be doing a bit more work on Sony as a potential recovery story.

Disclosure: At the time of this writing Research 2.0 has no position in the shares of Sony.

Comments

[Pfloyd234:]

Sony? They make computers? :) No but seriously....I don't even think it is possible to intentionally do what they have done all these years. I like how Sony has yet to get rid of that bureaucratic Japanese style that continues to hurt that company. They need to drastically change that company and get rid of everything that is holding that company back. It used to be a great company. Now its a laughing stock. Look at their computers? Overpriced and bloated with junk. Phones? When was the last time you got excited about one of their phones? They were the first to come out with an e-reader but for some strange reason the thousands of "Geniuses" their could not figure out that maybe hooking it to a cell network could make it much better. Amazon comes out with the Kindle...their first device and now they got a strangle hold on that market. Its like Amazon came out with the first e-reader because the Sony one didn't exist to most people. Now they release a new reader with a lot of the same features as the Kindle. That shows a company that copies and has a huge void when it comes to innovation. They don't create buzz like Apple does. Until Apple came out with the iPhone and its touch interface did the other companies realize.....wow...thats a great idea. Until Apple came out with the App Store....no one realized....wow that is also a great idea. Now everyone has both....but Apple has a leg up. Because they were the true innovators in a lot of the new features in devices today. Other great companies like RIM have their work cut out for them.....Sony has three Everests to climb....and probably K2 as well.

Sep 09 04:47 AM

[Igneous:]

I agree, Sony needs to get their act together. How many years and management changes and intiatives does it take? I have been buying Sony home entertainment products since the original WalkMan. The last 15 years I have been most disappointed with them as company of choice for TV, Video, and Audio equipment especially...as well as a stock holding. They have their hands into too much and need to get back to what they used to do best. They are losing their customer base. Are you listening Mr. Stringer?!

Sep 09 01:24 PM