Sony has unveiled a new three-year strategy and management plan, setting a greater focus on services and its camera components business to lead growth. The device businesses, including TVs and smartphones, are expected to show only marginal growth, with a greater focus on stable cash flow.
The company also announced that it would pay about USD 2.3 billion to gain control of EMI Music Publishing. Sony will buy the 60 percent stake in EMI Music held by the UAE's Mubadala Investment Company, giving Sony 90 percent of the shares and making it a consolidated subsidiary.
Under the new strategy, the company set three main goals: reinforce direct-to-consumer services and content, position the branded hardware business as "sustainable and consistent cash flow generating businesses" and aim to maintain Sony’s global number one position in imaging applications and become the global leader in sensing.
The goals mean a greater focus on services for the Playstation platform, including subscription games, video and music, as hardware sales slow. This will be supported by Sony's Music and Pictures business, while the latter also develops its TV channel business, particularly in India. Playstation is forecast to see a drop in operating profit in the coming years, to between JPY 130 billion and JPY 170 billion in the fiscal year ending March 2021, down from the JPY 190 billion forecast for this financial year. The Music division should be largely stable over the period, while Pictures profit is expected to grow.
The remaining device divisions will be grouped together as 'Branded hardware'. This includes mobile communications, home entertainment & sound, and the imaging products & solutions division, all of which are expected to increase operating profit over the three-year period. Sony noted that Branded Hardware was the "driving force behind Sony's record profits" in the past year, while over the next three years, it is expected to be "the business which generates the most stable cash flow". In this area, Sony said it will continue its policy of targeting profitability and the premium market rather than "unnecessarily pursuing volume".
The main growth business will be semiconductors, which is forecast to grow from JPY 100 billion in operating profit in the current year to JPY 160-200 billion in the year to March 2021. Sony aims to expand its CMOS image sensors to serve a wide range of IoT applications. To this end, Sony will extend its development of sensing applications beyond the area of smartphones, into new domains such as automotive use.
For the group, operating cash flow will be the most important performance metric, Sony said, and set a target of total OCF of JPY 2 trillion or more, excluding the Financial Services segment, for the three-year period. Around JPY 1 trillion will go to capital expenditure during the period, and the priority for remaining JPY 1 trillion will be strategic investment, while also making an "appropriate allocation to balance sheet improvement and shareholder returns".
