Corporate Strategy Meeting FY2014

A Message from Kazuo Hirai, President and CEO

Corporate Strategy Meeting FY2014

Results of the last two years and forecasts this year

Reflecting on FY2013 and FY2014 projected earnings

As explained at last week's earnings announcement, we recorded a substantial net loss for the 2013 fiscal year. Looking to fiscal 2014, due to the delayed recovery of our electronics business, and the continuation of our comprehensive restructuring program, we are again anticipating a net loss, of 50 billion yen.

When I was appointed president, I made revitalizing the electronics business my highest priority, and we have since executed many initiatives. Yet, while the Entertainment and Financial Services businesses posted results that exceeded our projections last year, I am extremely disappointed that we have not been able to complete our electronics turnaround. In particular the fact that we have recorded a net loss for two successive years is something I take very seriously, and being unable to meet the expectations of our stakeholders, especially our shareholders, is something I deeply regret.

Looking back over the past two years, in the areas we have defined as our core businesses, we have successfully launched new products with the potential to become growth drivers, and business performance has improved significantly. Yet last year our loss-making businesses cancelled out these gains, and we were ultimately unable to achieve the overall profitability improvement we had forecast. There is no question that we are fighting in a rapidly changing, fiercely competitive environment. Yet I can only conclude that our response to these environmental changes has been neither effective nor nimble enough, and that we have been late in enacting decisive change.

FY2014 is "the year we complete our restructuring"

Fiscal 2014 is the last year in the three-year plan I presented when I was first appointed president. So that from fiscal 2015 we can transition the company to a three-year growth period, and a structure capable of delivering stable profit, I have positioned this year as "the year we complete our structural reform" and have resolved to push on with comprehensive "transformation."

We will change our structure from one that results in successive downward revisions and losses. We will address external criticism regarding the time it has taken to complete our restructuring, by taking an urgent and decisive approach to ensuring that reforms are completed in the current fiscal year, and are not delayed further into next year or beyond.

Today I would like to discuss three areas: "the reform of our electronics business structure," "fiscal 2014 key initiatives to be executed in core businesses," and "new technology development and measures for new business creation leading to growth from fiscal 2015."

Completion of Electronics Business Structural Reform

Firstly, the reform of our electronics business structure.
The first areas we have addressed are the PC and TV businesses for which we announced a fundamental transformation plan in February.

VAIO has been an extremely important business for Sony, where we have continued to challenge new frontiers. It has also been an extremely important brand for the company. However, given the significant losses of the past two years, and the changing market environment, we took the very difficult decision to withdraw from the PC business.

As recently announced, we have concluded a formal agreement with Japan Industrial Partners, Inc. to transfer part of the business, mainly in Japan, to VAIO Corporation, a new company to be established by JIP, targeting July 1st. I sincerely hope that the VAIO business will be reborn under the leadership of this new company, and that it will meet the expectations of all our customers who have loved the VAIO brand so much. At the same time, we at Sony intend to do all we can to support this transition, for example by continuing to provide aftercare service to existing VAIO customers.

Turning next to our TV business, we are steadily progressing with preparations for establishing the new company. Our target date for this is July 1st. The new company will be named "Sony Visual Products Inc.," and assume responsibility and decision-making authority for the entire value chain of the TV business. Last year we were unable to achieve our goal of returning the business to profitability, and instead recorded a tenth consecutive year of losses. This is a fact that I myself take very seriously. As stated in our TV business profitability improvement plan announced two and a half years ago, we completely reassessed our previous strategy focused on growing volume. We implemented measures such as the significant reduction of panel procurement costs, and the reduction of fixed costs related to design and R&D. Furthermore, last year we accelerated the shift to high value-added models, such as our 4K TV lineup, and received acclaim from customers that we are once again delivering truly "Sony" products. Yet despite all this, we still couldn't achieve our goal of returning the business to profitability. So why was this? In terms of the broader market environment, I could cite slowing growth in emerging markets, and the negative impact of exchange rates. However, my personal reading is that -- in the final analysis -- it was because we ourselves were still not in a condition where we could respond nimbly and flexibly to these kinds of changes in our external environment. Going forward with the new company, we will transfer over the functions essential for running the business. And at the same time, we will drive ahead with restructuring the sales companies, as well as the headquarters and indirect functions supporting the TV business. By doing so, we intend to steadily reduce fixed costs and establish a new business structure that can minimize the impact of external market fluctuations. In terms of the new company's management, Masashi Imamura and his team will continue to oversee the business, and run the new company with continuity and consistency as we proceed to reduce costs and execute our high value-added strategy, including 4K, while also working to establish speedy, more flexible operations.

Looking at the current status of our operations, we believe it will be possible to return the TV business to the black in the current fiscal year. We recognize there have been certain concerns expressed about our forecasted annual sales of 16 million units, suggesting that it is too aggressive. However, even if the risk of having to reduce this volume materializes, I believe that as a result of the reforms that have been carried out until now, the current TV business management team has the strength to respond to market fluctuations quickly and dynamically, and minimize the profit impact. Furthermore, in order to secure the achievement of stable profit, we are also exploring various countermeasures should unexpected circumstances arise.

Next is the reform of our sales companies and headquarters, which are directly aligned with our TV and PC business restructuring. As our CFO Mr. Yoshida explained at our earnings announcement last week, we will implement cost reductions across these areas within the current fiscal year, targeting total cost reductions of approximately 20% across our sales companies, and approximately 30% across our headquarters and support functions in fiscal 2015 compared to fiscal 2013.

We expect to incur total costs of more than 300 billion yen during fiscal 2013 and fiscal 2014 in relation to the reform of our electronics business. While these costs are substantial, the structural reforms they facilitate are anticipated to result in annual cost reductions of more than 100 billion yen starting in fiscal 2015. Regarding financial targets from fiscal 2015 onwards, I would like to present further details together with our mid-term growth strategies after we have fully completed the structural reforms we are carrying out this year. However, taking into account the cost savings these reforms are expected to deliver; reduced losses from the PC and other businesses; the expected profit contribution from the core electronics business that I will be explaining shortly; and the stable profit contribution of the entertainment and financial services businesses, we believe it will be possible for us to target consolidated operating profit of 400 billion yen in fiscal 2015.

Key initiatives to be executed core businesses in FY14

I'd now like to talk about the priority measures we will be implementing this year in each of our businesses.

Positioning and further strengthening of Entertainment and Financial Services businesses

While the turnaround of our electronics business is behind schedule, the Entertainment and Financial Services businesses continue to make a major contribution to the Sony Group's earnings. When you hear people talk about Sony, you often hear the phrase, "In contrast to Sony's strong Entertainment and Financial Services businesses, its primary business, electronics, is still..." As I have repeatedly said before, I consider Electronics, Entertainment and Financial Services to all be vital businesses for Sony, and that all of them should be considered primary businesses. Sony took its first steps into the Japanese music business in 1968, and some ten years after that, we entered the life insurance market. A decade later, in 1988, we acquired CBS Records which took Sony's music business onto the global stage, and the acquisition of Columbia Pictures the following year marked our entry into the movie business. Each one of these is a business in which Sony now has more than a quarter-century of history behind it, and we are very proud that each one has built a strong position for itself in its respective industry.

Revitalizing the electronics business while continuing to grow the Entertainment and Financial Services businesses is the fundamental growth strategy for the Sony Group, and has been my constant priority ever since I was appointed president.

Regarding Entertainment, last November we held briefings on these businesses for investors and analysts, and at those briefings I explained that we will be working even harder to make them a greater source of profit.
On the restructuring front, we had previously announced that we would reduce costs in Pictures by 250 million dollars. Then at the Investor Day last November, we announced that we would work to identify additional reductions. Since then, we have identified more than 50 million dollars in additional reductions, resulting in a total amount of more than 300 million dollars by the end of fiscal 2015. In fact, we have already implemented a series of measures resulting in 130 million dollars of those cuts being achieved by the end of fiscal 2013. In terms of motion pictures, "The Amazing Spider-Man 2", which is in theaters right now, has already generated 640 million dollars in box office revenue worldwide. We are also steadily implementing measures this fiscal year that intend to enhance the business's profitability by 25% over the previous year. In the television production and media networks businesses that are now focus areas for Sony, we have been seeing steady growth, especially in our Indian networks business as well as the Game Show Network and other cable network businesses in the U.S. Speaking of the U.S., we had 7 direct-to-series orders in the last year and a number of our new series were picked up for a second season. We also produced the number 1 new drama series, "The Blacklist." Given the ever-growing demand for content, we plan to continue to produce quality programs while working to grow our business and profit going forward.
Turning next to Music businesses, amidst a slowdown in the growth of the digital music distribution market -- particularly in the U.S. -- subscription services are growing as a new revenue stream and we will be putting new effort into expanding our market share by uncovering new talent and cultivating new markets in emerging economies.

When we look at the overall environment for content, it is clear that as the scale of networks has expanded there has been a growing trend for "original video content" to appear first on the Internet. In the U.S. movie and television industries, until now the strength of the four big networks with their ties to the major studios, and the power of syndication had been considerable. In fact, some have even suggested that our profit margins might be low because we aren't among the big four. But as the Internet evolves from being a secondary channel for the distribution of content to a source of brand new content, I believe that for Sony, not being among the big networks will actually work to our advantage when it comes to rolling out new businesses of our own. At Sony we already have our own network services such as Music Unlimited and Video Unlimited, while Netflix, Amazon and other online content distributors that handle a broad range of content are also continuing to expand their market presence. If you look at it from the creator's point of view, it's extremely exciting to have all these new channels where you can distribute your content directly. The value of compelling content is soaring, and this is a very positive development for all content holders and producers, including Sony. And with digital content distribution shifting increasingly from downloads to streaming, the entertainment industry environment as a whole is realigning drastically.

When you consider this new environment, in terms of content the Sony Group already has outstanding talent and assets. Our cable TV drama "Breaking Bad" was a tremendous hit that took the Emmy for Outstanding Drama Series last year and was watched by viewers around the world. Meanwhile, Sony Music artist Daft Punk was awarded a total of five Grammy's, including best album. With our rich content assets and our capacity to create great content, we believe that Sony is perfectly positioned to wield new strengths in the coming era.

We are going to continue to explore new ways to innovate in Entertainment, including collaboration with our Network business.

Moving on to our Financial Services, as demonstrated when we introduced the entirely new "Life Planner" system to the life insurance market in Japan, Sony has continued to take a customer's perspective to bringing innovation to financial services. This is an industry where it is widely acknowledged how hard it is to differentiate your products from your competitors', and I think there is real significance for Sony to be in this business. Our life insurance, non-life insurance, and banking businesses have all steadily expanded their services, and they have earned high customer satisfaction ratings by providing outstanding services that our customers can use with confidence. We aim to maintain this stable profit growth in our Financial Services business by continuing our pursuit of service quality. And at the same time, we will be working to grow our nursing care business, launched last year, into a fourth pillar of our financial services.

Measures to reinforce core electronics businesses

Now let's talk about Electronics.

As I have said repeatedly in the past, we face an extremely competitive environment for all three of the business areas -- Mobile, Game and Imaging -- that we have designated as our core businesses. However, I believe that, even in this challenging environment, we can prevail by generating innovation and providing a unique value proposition unlike that of any of our competitors. Two of our key devices -- our image sensors and batteries -- will also support these three core businesses and provide the foundations for us to deliver unique customer value.

Establishing new business models with PS4 and Network Services

Let me begin by talking about our Game and Network Services business.

This fiscal year we are set to consolidate our leading position in the home console market by further expanding PS4 sales around the world. Following its introduction in North America in November 2013, in 5 months, PS4 has launched in 72 countries and regions achieving cumulative sell-through of 7 million units as of April 6. It's been a hugely successful launch, but the key to the long term success of the platform lies in how solidly we can continue to grow the installed base. In terms of game titles for PS4, as of April 13, 47 titles had been launched with a total of 20.5 million units being sold via retailers and over the network on the PlayStation Store. By extracting the best creativity from all of our partners in the game development community, PS4 has dramatically expanded the possibilities of game play. But at the same time, PS4 is also designed to provide the kinds of social experiences via the network that offer users a richer gaming experience than ever before. PS4's remote play function also allows users to easily enjoy the PS4 experience on their PlayStation Vita, expanding the PS4 gaming experience beyond your living room, and making it available anytime, anywhere. From a profitability perspective, PS4 is also already contributing profit on a hardware unit basis, establishing a very different business framework from that of previous platform businesses.

The network functions that are possible with PS4 continue to evolve by the day. Approximately half of PS4 users are registered to the PlayStation Plus subscription service, while the number of active users on the PlayStation Network and Sony Entertainment Network exceeds 52 million worldwide. Many of our users now enjoy an array of game, music and video content via the network. And our PlayStation App for smartphones and tablets that lets players share their PS4 experience to their mobile devices, is also proving hugely popular, with the total number of downloads already exceeding 4.5 million. Sales from our network business including game, music and video services exceeded 200 billion yen in fiscal 2013, and we intend to further expand that figure going forward.

When I was telling you about our entertainment business earlier, I said that the shift in digital content delivery from downloads to streaming is only going to accelerate. In the case of game content, the data format is completely different from movies and other video content, so there needed to be a technological revolution before we could switch from distributing game content via downloads to streaming. But starting this summer, we will begin distributing PS3 games via streaming to our users in the U.S. on an open beta version of our new PlayStation Now streaming service, first for PS4 and then PS Vita. And that's just the first step. Going forward, we will use streaming to deliver the PlayStation experience worldwide. We also plan to make PlayStation Now compatible with new "BRAVIA" LCD TVs to be launched in the U.S. market this year. And in the future, we intend to extend its availability to a wide range of networked devices.

Our vision for network services at Sony -- a vision of launching a revolution in entertainment with cloud-based services -- goes beyond games. Within the year we will be introducing in the U.S. a new, cloud-based television service that is even more personal and dynamic, and even more attuned to our customers' tastes and viewing habits. It combines the television programs that have received such strong praise from our customers on cable TV, with the dynamic viewing experience people want from a digital media service. Because it will be possible for our customers to enjoy both the most popular new TV programs, and a broad video-on-demand content library on this new service, they will be able to see all their favorite movies, TV shows and sports programming in one place. We are also working to make it incredibly easy to access exactly what you want to see from this vast library of content.

At Sony we plan to provide a revolutionary experience that intelligently brings together cloud-based live television, video-on-demand, and content saved on customers' digital video recorders -- that also makes it possible to easily and seamlessly access it all, at any time, on any device.

So, as you can see, in the Game and Network business we are set to secure even greater sources of profit by further expanding our content, software and network services on the firm foundation of a platform business that continues to generate stable profit itself, and offer our customers even more new and exciting entertainment experiences. This year marks the 20th anniversary of PlayStation. The PS2 platform was the biggest success until now in terms of profit, but I believe that PS4's hardware, software and services have the potential to combine and develop into a platform capable of generating even greater profit.

Mobile: Steady business growth and thorough volatility management

Next, let me talk about our Mobile business.

In fiscal 2013 we introduced several new additions to our flagship range of "Xperia" models, which incorporated the best of Sony's technological assets, such as our industry-leading camera technology. While we unfortunately did not reach our initial sales forecasts, we were able to increase shipments by more than 50% compared to the previous year, and improve profitability by 50 billion yen, swinging the business into the black.

We plan to grow our sales and profit in fiscal 2014 by implementing the measures I will explain shortly. However, I consider the most important factor for the mobile business this fiscal year is how it overcomes risks such as sudden changes in the business environment, and dips in demand. The global smartphone market continues to grow. However, the reality is that growth has been slowing in developed markets, and there is accelerating commoditization, making smartphones a highly volatile business in which opportunities exist back-to-back with business risk. We will reinforce our monitoring, and establish a structure whereby the business plan can be immediately adjusted if necessary.

In terms of our initiatives for fiscal 2014, firstly we will proceed with the timely launch of new additions to our flagship XPERIA lineup, that bring together the best of Sony's technologies and assets, and by doing so enhance brand awareness and firmly secure our standing in the premium market segment. This has been our most important strategy for XPERIA from the very beginning, but this year we will also be strengthening our entry-level product lineup according to different regional needs, in order to deliver the enjoyment of XPERIA to even more customers.

Looking at specific regions, in addition to Japan and Europe, we will also take measures to strengthen our presence in the U.S. market. The U.S. is intensely competitive, but we believe that by building strategic partnerships with network operators and by introducing models that match the needs of our customers, we will be able to grow our presence.

Our range of smartphone companion products that take advantage of our strengths in audio and video not only enrich our users' enjoyment of their smartphones. They are also contributing to making mobile phone stores more enjoyable too, even as they help expand the user experience and contribute to extending our range of revenue streams. We look forward to seeing them broaden the scope of our smartphone business in the future, and to become another pillar for creating a more stable business structure.

We are also enriching our range of "smartwear" products that combine with smartphones to further expand the user experience. Our wristband-style "SmartBand" records users' various daily activities, and offers information that may in turn become the trigger for future behavior patterns. In terms of smartwear product development, we intend to follow SmartBand with even more uniquely "Sony" product proposals.

To reiterate, in the mobile business, our foremost priority this year will be to implement measures for growth, and to thoroughly manage risk control.

Leveraging Sony's strength in Image Sensors to Reaffirm Sony's leading position in the Global Digital Imaging space

The third of our core businesses is Imaging.

In this area, we are integrating our highly competitive, cutting-edge image sensor technologies with our wealth of camera expertise to drive the growth of both our finished product and device business. Regarding image sensors, we recently established Sony Semiconductor Yamagata Technology Center as a new manufacturing hub, using the semiconductor manufacturing facilities at Tsuruoka plant we succeeded from Renesas Electronics Corporation. The market for mobile products such as smartphones and tablets continues to grow, and the new facility will produce the stacked CMOS image sensors for which increased demand is anticipated within these markets. By doing so we intend to reaffirm Sony's leading position in the digital imaging industry.

With regards to our professional and consumer camera businesses, we aim to maximize the strength of our independently-developed image sensors, in combination with our image processing engines and wide diameter lenses, to deliver high value-added, compelling products. For broadcasters and other customers in the professional market, our 4K professional cameras -- that have already secured high market share -- are central to our product offering. And going forward, we plan to achieve further business growth by shifting our model away from one that ends with the sale of a standalone product, to delivering total business solutions.

In the consumer market, we will be focusing on digital SLR and high value-added compact models. Specifically, we will seek to create new markets and grow the presence of our "α" range of compact cameras incorporating large-scale image sensors. At the same time we will seek to reinforce our "RX" series lineup that has already established a strong presence in the premium market. By doing so, we aim to establish a robust profitability structure, resistant to market fluctuations. In addition, we will be increasing our efforts to introduce ground-breaking products such as our lens style camera and Action Cam that deliver new user experiences and value.

Sensor and Batteries to support core businesses

Inside Sony we have a slogan: "Transform Sony with devices." What it means is using devices as the driving force for creating new services and new products that are truly "Sony." The pillars supporting this drive will be image sensors and batteries.

In the lithium-ion battery market that is expected to grow into a 3 trillion yen market by fiscal 2017, the field where we are actually putting most of our effort today is laminated gel polymer batteries for mobile applications. In addition to their flexibility, which lets you make batteries thinner and form them in any shape, they deliver significant advantages in terms of safety and battery life. Naturally, that makes them ideal for smartphones and tablets, but we are confident this technology will truly demonstrate its strengths in the era of wearable products.

The second area in batteries we are focusing our efforts is olivine-type lithium-ion iron phosphate batteries for electricity storage systems, which possess a usable battery life of 20 years in indoor environments, and a hard crystalline structure that makes them very safe to use. Right now they are being used primarily in public and home applications, but just last month we were pleased to announce that we will be establishing a joint venture with Hydro-Québec, Canada's largest electricity producer, to research and develop large-scale energy storage systems. It is our intention to use this new venture as a foothold into the electric power-related infrastructure businesses.

Medical business achieving steady progress

Next, let's look at Medical.
Sony's medical business is still in its growth and development phase, but we intend to steadily advance it going forward.

Sony Olympus Medical Solutions, our medical business joint venture with Olympus Corporation, is proceeding with the development of surgical endoscopes using 3D and 4K technology, and we expect to be able to launch our first products on schedule in fiscal 2015. As we have moved together through the development stage of this new venture, both Olympus and Sony have felt a real sense of progress. We will be adding further personnel from both companies as we work towards our market launch.

We are also beginning to see results from our introduction of operating theater system integration. Here, too, Sony's video technology and knowhow are yielding concrete results, including significant acceleration of the pace with which we are able to develop and refine these systems.

Overall, we have set ourselves a sales target for the medical business of 200 billion Yen in fiscal 2020. Our aim is for our medical business to become an indispensable presence for people around the world.

Next I would like to tell you a little bit more about the technologies that provide the foundation of Sony's electronics business today, and about the direction of our future R&D efforts. Once we have completed our restructuring, it will be nothing other than the strength of our technologies that will differentiate our products, and drive electronics business growth. At Sony we have the seeds of many technologies with great future potential. Going forward we will be selecting those that are truly capable of providing us with mid to long-term competitive advantage, and are able to differentiate our business, so that we can concentrate our resources in these areas. Today I have asked Tomoyuki Suzuki, who is Corporate Executive Officer in charge of Sony R&D and Devices, to tell you more.

New technology development and measures for new business creation

Changing Lifestyles with Technology

Today I will be telling you about in the direction of our R&D efforts.

Ever since Sony's founding, whether in home or mobile, we have always pursued the advancement of new technologies, continuing to deliver products and services that move our customers emotionally. Generating innovation that changes people's lifestyles is something that, as Sony engineers, is our mission and is in our DNA.

At Sony, we believe that as products become increasingly networked and integrated with the cloud, it will be possible for us to deliver new user experiences. In terms of the "home", "Life Space UX" allows you to enjoy video or music, or access information you need, anywhere within a household or community space. In the "mobile" space, we are seeing the advent of "wearable" products that use various sensors to log your day's activities, or glass-style displays that instantly deliver the information you need. Sony will propose new lifestyles through our "Life Space UX" and "wearable" products.

As for technologies, they can be broadly categorized as device technologies and information processing technologies. Sony's is particularly strong in device technologies -- namely image sensors, batteries and low energy consumption technologies. While in information processing technologies, we are especially advanced in the area of Natural UI and signal processing technologies. These technologies are an indispensable means of differentiating our core game and network service, mobile, and imaging businesses, and advancing their development even further will lead to new businesses creation.

First, let's look at image sensor technology. Sony has constantly led the world in CMOS image sensor development, making innovative breakthroughs, such as the launch of backlit and stacked CMOS image sensors. Going forward, we will pursue advancements not only in still images, but also video capability. In our "α7S" digital SLR camera, we have realized more than ISO400000 light sensitivity. We have also enabled rapid shutter speed of 1000 frames per second to realize extremely realistic super slow motion video.
Furthermore, with the "α6000," by positioning an AF sensor on the image sensor surface, we have achieved the world's fastest auto focus time of 0.06 seconds. We are now applying the same structure to the area of depth-sensing, which is used when measuring the depth of an image.

Next I'd like to talk about information processing technologies, in particular recognition technologies. Sony's body and face recognition technologies have evolved into features such as smile shutter and auto focus functionality in the digital imaging space, as well as face recognition log in for PS4. Combining this technology with advanced signal processing technology allows us to realize augmented reality, or AR technology. AR enables real images to be layered with CG images in 3D,or graphics such as text information to be projected over actual landscapes.

Furthermore, in "Life Space UX," these recognition technologies are being combined with depth sensing technologies to allow the user to control a space in the way you would a smartphone touch panel screen, or input commands using human gestures. We believe the realization of natural UIs of this type will also enable us to deliver new forms of entertainment spaces.

Finally, I'd like to touch on our battery and low energy consumption technologies.
Wearable products are constantly sensing information about your physical condition using various methods of input and output processing, and different calculations. And at the same, they are continuously linked to the Cloud. This means that low power consumption is vital. At Sony, with our vast experience developing products such as Walkman and Handycam, we have a wealth of expertise in total energy management technologies, or, in other words, stamina technologies. We also possess low energy consumption circuit technologies used in GPS receiver LSI for mobile devices. By leveraging these low energy consumption technologies, and combining them with Sony's own, high-capacity gel polymer batteries, we will be able to create wearable products that deliver extended usage times.

We will continue to take on new technological challenges with the conviction we have done since the days of our founders, Masaru Ibuka and Akio Morita. Their mission was to "create new lifestyles" and "enrich people's lives," and that remains true of the Sony of today. Please look forward to many more exciting products and services.

I've also visited many of our technology sites at Atsugi and other locations. During every trip I make a new discovery, and always look forward to extremely productive discussions with our many talented engineers.

Advancing innovation and new business creation

Lastly, I would like to quickly explain the efforts we are making in the areas of new product and new business creation.
As I explained at last year's corporate strategy meeting, since becoming president, I have visited Sony Group sites all over the world, where I witnessed, first-hand, the drive and ambition of our employees to create new products and businesses. I myself have also strived to create forums where ambitious and talented employees can rise to new challenges. Even within existing business groups, I have encouraged employees to aggressively take on new challenges, and have backed ideas that show true innovation or future potential, regardless of initial business scale. As a result, this past year, we were able to successfully launch a number of new products, such as our lens-style cameras and Music Video Recorder, that deliver entirely new user experiences, and customers have proclaimed as being truly "Sony."
Furthermore, we established a new organization tasked with creating new products and businesses that go beyond the boundaries of our existing business structures. This group has overseen the development, and roadmap to market launch, for products such as our 4K ultra-short throw projector, which will be the very first in our line of new "Life Space UX" products that harnesses space to deliver new user experiences, and Smart Tennis Sensor.

And in April, we launched a dedicated new organization responsible for finding the seeds of technologies and concepts that already exist within our organization, and then systematically reviewing and transitioning them to new businesses. The group will simultaneously work to enable the new business to launch while nurturing the young talent embarking on the project. I look forward to seeing this new movement, in time, becoming the driving force for a new Sony. Sony Real Estate Corp., which will commence operations in August is one such initiative, but I look forward to this new group giving rise to any number of new businesses that can someday become future pillars of our business.

Path to create a new Sony

Today I have been talking to you mostly about the things that we at Sony need to do to return ourselves to a high profitability structure, and the specific areas we will be focusing on in fiscal 2014. This may seem a little unorthodox for a corporate strategy briefing, but, as I said in my opening remarks, I feel both the strongest resolution and an acute sense of urgency that -- if we cannot execute all the things we need to get done this fiscal year and generate real results -- it will be all but impossible to envision a growth strategy for the mid to long-term.

I repeat again, in fiscal 2014, I consider it my responsibility to complete the structural reform of our electronics business in order to transition the company to growth from fiscal 2015. Reform measures will not extend beyond the current fiscal year.

We will also further reinforce the solid profit foundations provided by the entertainment and financial services businesses, while also seeing through the transformation of our three core electronics businesses, in order to drive growth from FY15. Specifically, as I have explained today, in imaging we will accelerate our shift to high value-added models and continue to strengthen our image sensor supply platform. In mobile, we will bolster our regional strategies and model lineup and establish a structure that will enable us to manage the risk of business fluctuations resulting from product commoditization. And in game and network services, we will grow the installed base of PS4, and strengthen our network business in order to drive profit growth from fiscal 2015 onwards.

In order for Sony to continue delivering surprises and kando to customers

I believe that we must always maintain our corporate culture that stresses freedom and open-mindedness, and the Sony spirit of "doing what other people don't" that has been passed down since our founding as Sony's enduring DNA. But at the same time, if there are things that need to change with the times, then I also firmly believe we must never be afraid to implement that change.

We will complete our process of reform, in order to deliver true value for our customers, and world-leading new products and services. Instilling our customers with a sense of wonder and "Kando" whenever they touch a Sony product, hear our music, or view our images. This commitment is shared by all Sony Group employees around the world.

This is a time of great challenge. We have to implement difficult measures that will result in great pain for our employees. In fiscal 2014 we are committed to seeing through our structural reform, and returning to a financial structure that will enable us to make new investments and embark on new challenges. It is my firm belief that, once we have accomplished this formidable task, the path will open to create a new Sony that can bring new surprises and "Kando" to our customers.

May 22, 2014
Representative Corporate Executive Officer, President and CEO
Kazuo Hirai

Kazuo Hirai
Page Top