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Day 1 - IFA International

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Visionary Interview Kaz

Visionary Interview Kaz Hirai Kazuo (“Kaz”) Hirai, born 1960, was named as President and CEO of Sony Corporation in April 2012. After beginning his career with what is now Sony Music Entertainment in Japan in the late 80’s, then heading up the company’s American operation, Hirai was credited with playing a fundamental role in the success of the PlayStation in the US market. After several senior roles in Sony Computer Entertainment’s corporate executive group, he became the Chairman of the group in September 2011. On 1st February 2012, Sony announced that Hirai had been appointed as President and CEO, effective 1st April, becoming the successor to Howard Stringer, the then sitting president and CEO of Sony Corporation. He was appointed to the board at an annual shareholders’ meeting on 27th June, 2012. The New Sony Exclusive interview: the five-point plan the new CEO is implementing to re-make Sony Kazuo Hirai President & CEO, Sony Corporartion “(...) we just need to make sure that, as I mentioned, we are focussed on where Sony has a distinct technological advantage or product advantage… or a combination of both.” In Japan, 2012 has been a year of upheaval in the senior management of the country’s electronics giants, within a scenario of landslide losses due to the great Eastern Japanese earthquake and tsunami, the disastrous flooding in Thailand and the local currency valued at new highs, making overseas sales a titanic task. The management change that set most tongues wagging, but that had been long anticipated, was at Sony Corporation, where long-time CEO and President, Sir Howard Stringer, passed on the reins to a dynamic and motivated 51-year-old “Kaz” Hirai. The “very international” Japanese leader is credited (among other things) with the massive success of the PlayStation in the USA. In this exclusive interview with IFA International, we asked Hirai-san to explain, in global terms, what will change under his direction… [ Interview by Richard Barnes ] There are several things we need to do better, with the aim of focusing our business. We really need to execute with a lot more speed, which means faster decision-making and implementation, and getting the entire company on board with this focus, speed and execution. We already announced five main points of action at our corporate strategy meeting in April. First of all, we need to strengthen our core business, which we have identified as being digital imaging, mobile, and gaming. The digital imaging space includes everything from our image sensor business all the way to our Cyber-shot, Handycam down to our professional imaging products… that whole value chain. Secondly, the mobile space is going to be very important to us, including tablets, smartphones, and obviously PCs. And the third area of product focus is video gaming and network services. We need to make sure that most business decisions we 14

Visionary Interview make going forward aim to strengthen these three core businesses. In addition to this, we need to turn around the TV business… and we are making a renewed effort in expanding our business in emerging markets. Another key point is the creation of new businesses. It’s important to expand our medical space and further our innovation in the R&D space. And the fifth point I would raise is really to make sure we are totally focussed, which means we need to realign our business portfolio and ensure we are optimising our resources. All Japanese companies have been in for a financial hammering in the past couple of years... as similar challenges are looming for companies like Sharp and Panasonic. What will be the secret to turning around Japan’s tech economy? Of course I can’t speak for other companies, but what I have been telling my managers and employees is that there is really no “secret recipe” for this, and we just need to make sure that we are focussed on where Sony has a distinct technological advantage or product advantage… or a combination of both. We have to make investments in those specific spaces in order to have that edge over our competitors. The other important area is to improve upon the product portfolio we already have, with better quality in terms of picture and audio, and faster processing speed. But while all those things are good, at the same time, I think we also need to try to be innovative and create products that really change consumer behaviour, as the PlayStation and the Walkman did many years ago. We need to be aggressive in bringing innovations to market. You have spoken in interviews earlier this year about the urgent need for restructuring, and you spoke of “delayering”. How are your plans going, and how far will they have to go in order to make Sony profitable again? We have put a new management team into place, and we ensured that the span of control is as efficient as possible with each of the senior management people I have in place. At the same time, we have already done a lot of restructuring in terms “It’s a combination of defence and offence that is going to turn the TV business into profitability” of changing our business portfolio, which is part of de-layering as well. Let me give you just a couple of examples. One is the dissolution of the joint venture with Samsung – at S-LCD – manufacturing LCD panels. We have also exited the JV with Sharp, again for the manufacturing of LCD panels. We have announced the divestiture of our chemical business. These are examples of the de-layering and optimising of our business portfolio, making sure that we are focussed on the core businesses and not in each and every potential market segment. What are your plans or ambitions for Sony’s TV business, and what do you see as being the next big trends? I have publically spoken about turning our TV business back to profitability by the end of the fiscal year 2013. I have outlined some of the steps through which we will get to that. And without getting into a lot of detail, it is a matter of making sure we leave no stone unturned as far as our costs are concerned, which includes everything from components, all the way down to logistics and engineering costs. Those are defensive moves, but at the same time, we need to be offensive as well in ensuring that even in this commoditized LCD space, we continue to bring to consumers product that is differentiated in terms of picture and audio quality, and the kinds of services you can access, all the way down to aesthetic design. It’s a combination of defence and offence that is going to turn the TV business into profitability. It is a huge order, but at this point, we have a roadmap in place, and at least as of the first quarter of this fiscal year that started in April, I am happy to say we are ahead of where we had planned to be on that roadmap. Is R&D more important today? It absolutely is, and it’s part of Sony’s DNA. I have realigned and changed the R&D organisation, putting a new management in place to better align the R&D goals and objectives with the product goals and objectives. This again needs to be aligned with the core businesses that I described. In the past, the R&D folks were, in a good way, doing a lot of different R&D activities outside of our core businesses, and my mandate has been to ensure that for the next years, the R&D is laser-focused on the core businesses that help differentiate Sony. Design has always been important for Sony. What trends are happening here? Good question. Over the years, Sony has always been at the forefront of industrial design (ID) aspects of many products, and we keep pushing the envelope as far as ID is concerned. But as is also the case for a number of other players, it’s all about developing the “total user experience”. This includes the look and feel of products at retail, including the design of merchandising. How does the box look? What do consumers see when they first open the box? It goes all the way down to when you switch a device on for the first time, what does the user interface look like, and how does it add to the overall experience? How does the design integrate with the network services we provide through those devices? It’s more about a user experience rather than just looking at something from just an industrial design perspective. How important is IFA Berlin as a "shop-front" for Sony? It is a very important event for Sony, and I also think for the industry as well, given the kind of exposure and coverage it gets and obviously it has one of the largest numbers of visitors of the global CE events. It’s so very important for us in terms of getting the message out about our strategy and products. We also get a lot of business done thanks to discussions with dealers from Europe, and even Japan and North America. Another thing that is very unique compared to many other shows is that it is also open to the general public and for us, this is an important mechanism for getting feedback in real time for some of the announcements we make and some of the products we display, and that’s quite helpful, because reactions can sometimes be different from the consumers as opposed to our retail partners. Hall 4.2 Stand 101 Sony Develops “Exmor RS,” Claimed as the World's First Stacked CMOS Image Sensor… As part of its rekindled push into the digital imaging sphere, Sony Corporation has announced the commercialisation of “Exmor RS,” what the company claims is the world's first CMOS image sensor incorporating a unique, newly-developed ‘stacked structure.’ Shipments will commence in October. Sony is introducing three models of the Exmor RS for use in smartphones and tablets, combining excellent image quality and advanced functionality with compact size. Sony will also launch three corresponding imaging modules incorporating these sensors. Going forward, Sony says it will continue to evolve its digital imaging products, while aggressively pursuing the further development and expansion of its core “Exmor RS” stacked CMOS image sensor technologies and line-up, in order to deliver increasingly diverse and user-friendly image capturing experiences. IFA International • Friday 31 st August 2012 15

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