Shakeup at Sony Puts Westerner in Leader's Role
By ANDREW ROSS SORKIN
and SAUL HANSELL
Published: March 7, 2005
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The board of the Sony Corporation of Japan named Sir Howard Stringer its
chairman and chief executive today, an unusual instance of a leading
Japanese company turning to a foreigner to fill a top position, the company
said in Tokyo.
Sir Howard, a Welsh-born former television news journalist, runs Sony
Corporation of America and has helped revive the company's music and movie
businesses in the United States. He will succeed Nobuyuki Idei, Sony's
current chairman and chief executive, who had planned to retire next year
after Sony's 60th anniversary.
This is a remarkable humbling for a company that once defined Japanese
innovation and technological prowess in the years after World War II. In
recent years, however, Sony has lost ground to American stalwarts like Apple
Computer with its dominant iPod digital music player and a raft of upstart
electronics manufacturers in China and South Korea.
It is also a recognition of the turnaround in Sony's entertainment
businesses, which are among the most profitable parts of the company, riding
blockbuster movies like "Spider-Man." And it underscores the changes that
are sweeping Japan, once ascendant in the world economy, but suffering
through a decade of little or no growth.
In a statement issued from Sony's Tokyo headquarters, Sir Howard hinted at
future efforts to integrate the entertainment and electronics focuses of the
company. "We look forward to joining our twin pillars of engineering and
technology with our commanding presence in entertainment and content
creation to deliver the most advanced devices and forms of entertainment to
the consumer," Sir Howard said.
Sir Howard, a charismatic 63-year-old who does not speak Japanese, was born
in Cardiff, Wales, and is an American citizen who splits his time between
New York and his family's home in London. Before joining Sony in 1997, he
worked for 30 years as a journalist, at CBS, at one point as a producer for
Dan Rather at CBS, and ultimately went on to run that network.
Sir Howard was knighted by Queen Elizabeth in 1999 and has become known for
being a likeable consensus builder, comfortable negotiating with both
Hollywood divas as well as eccentric engineers and managers in Japan.
"Forgive the awful pun, but he has kind of oriented himself to his Japanese
colleagues," said Peter G. Peterson, chairman and co-founder of The
Blackstone Group and a former board member at Sony who helped recruit Sir
Howard to the company. "It's a great achievement. They trust him. He's a
Mr. Idei, 67, was the first nonengineer to run Sony, and his departure will
come two years into his three-year plan to overhaul the company. During his
10-year tenure, Mr. Idei used his background in marketing to reshape Sony
into a more media-focused company.
Sir Howard, of course, is hardly an engineer himself. But in recent years he
has taken an increasing interest in Sony's electronics business,
particularly in areas that relate to music and movies. Sir Howard, who is
also vice chairman of Sony's board, has tried to break through the
bureaucratic logjams that have kept Sony - the company that invented the
Walkman - from competing effectively against Apple's iPod, the dominant
digital music player. And he has taken a key role in negotiating with other
Hollywood studios to get support for the new Blu-Ray disk format, which Sony
More recently, Sir Howard has been increasingly outspoken within Sony that
the company has to break down its balkanized structure in order to move much
more quickly in the marketplace. In a provocative speech to Sony managers in
January he declared that "the business of Sony has become management not
Sir Howard joins a small club of foreign executives who have taken the helm
of major Japanese companies. This includes Carlos Ghosn of Nissan and Rolf
Eckrodt, a German who led a failed effort to turn around Mitsubishi Motors.
Sir Howard does not keep a home in Tokyo, but he is expected to spend more
time in Japan, a Sony executive said.
Still, he has shown that he can build bridges to all sides of that company.
"Howard is the ultimate diplomat," said Vic Pacor, the former head of Sony's
television and home audio division in the United States. "He is even handed
and will bring the kind of stability that the company needs," said Mr. Pacor,
who is now president of D&M Holdings, a Japanese-American electronics
Allowing a foreigner to take over the reins of Sony would be one of the
boldest moves a Japanese company could make. Most Japanese boards and
executive ranks are filled with lifetime employees who win those spots more
through their loyalty than through their creativity.
Yet in appointing a foreigner to its top spot, Sony's management appears to
be completing a course originally set out in the 1950's by its co-founder,
He recognized then that Sony had the potential to become a global powerhouse
if it not only sold products overseas, but incorporated foreign thinking in
its products, its brand and even its management.
Sony was the first Japanese company to list its stock on the New York Stock
Exchange, something other Japanese rivals soon copied. Sony was also one of
the first big Japanese companies to invite a foreigner to sit on its board.
Sony is now one of the most widely held Japanese companies. Foreigners hold
more than one-third of Sony's shares, and foreign investors have had a
growing influence on the company's behavior.
Kunitake Ando, Sony's president is also set to resign and be replaced by
Ryoji Chubachi, 57, the company's executive deputy president who has
recently has been in charge of Sony's production operations. Mr. Chubachi
will also take charge of the ailing consumer electronics business, which
still represents 70 percent of Sony's revenue.
The appointment of Sir Howard appears to be a blow to Ken Kutaragi, the 54
year old executive who built Sony's PlayStation video game unit into the
company's most profitable division. A defiant and idiosyncratic engineer,
Mr. Kutaragi, who has long been seen as the leading candidate to become
Sony's next chief executive, was given responsibility for electronics and
semiconductors two years ago. Now he will again just run the game unit. And
he gives up his seat on Sony's board.
Several former Sony executives speculated that Mr. Kutaragi is still a
likely candidate to ultimately become chief executive. But Mr. Kutaragi has
been so outspoken within Sony that it would it would be too radical, even at
this point, for Sony to appoint him as the deputy to Mr. Stringer. Mr.
Chubachi, who is well regarded inside Sony, would be more acceptable to the
engineers who run Sony's powerful internal divisions.
Since last year, Mr. Chubachi has been leading an effort to wring more
efficiency from Sony factories by sharing technology and know-how among
plants. He is one of the three key executives in charge of carrying out
Sony's current revitalization strategy, along with Mr. Kutaragi and Shizuo
Takashino, 61, the man who invented the original Walkman and is now in
charge of improving product design.
Ultimately, Mr. Idei may have been forced to resign early because the
financial results of the company have been consistently disappointing. In
Japan, his tenure is most remembered for what has become called "Sony Shock"
in 2003 when the company's shares fell by 25 percent after an unexpected
In January, the company disappointed investors again saying that its profits
would be less than it had earlier forecast for its fiscal year that ends
March 31, mainly because it has had to lower prices on its core electronics
Mr. Idei has long painted lofty pictures of digital technology and how it
could be combined with Sony's music movie and game content. Yet the
strategy, which was first devised in the 1980's by Mr. Morita, has been slow
to evolve. Sony's engineers initially resisted the growing power of the
By the time Mr. Idei corralled them into cooperating, the company's
electronics division was under had lost its way in its two most important
product categories: televisions and portable music devices. It missed both
the shift to flat screen sets and MP3 players like iPod.
One pet project of Mr. Idei's, the introduction of the Vaio computer line,
has met with mixed results.
Mr. Idei has initiated a broad project, called Transformation 60, meant to
increase profit margins through new products and reducing costs. The company
has had successive rounds of layoffs and is moving more production to China.
Yet profit margins are far from Mr. Idei's targets.
"Just because Howard becomes C.E.O. doesn't mean we can expect a dramatic
change in earnings," said John S. Yang, an electronics analyst for Standard
& Poor's in Tokyo. "I think Mr. Stringer will be facing as many problems as
Idei-san did. But the good thing is that Sony has been proactive about
Sir Howard will likely need to repeat his success in the media business on a
much broader scale. In the United States, Mr. Stringer made a series of
unusual management choices. One of his first hires was Robert S. Wiesenthal,
a banker at Credit Suisse First Boston, who became the company's chief
strategy officer and later its chief financial officer. He later brought in
Andrew Lack, the former head of NBC, to run Sony Music and Michael Lynton,
the president of Time Warner International to run Sony Pictures.
In 2003, he combined Sony's music business with Bertelsmann's BMG Music.
And last year, he had Sony organize an investor group to buy
Metro-Goldwyn-Mayer, with its deep catalog of movies to bolster Sony's DVD
At the same time, Sir Howard orchestrated several severe waves of layoffs.
Mr. Peterson says that Sir Howard's experience restructuring Sony's movie
and music companies will help him take the tough actions necessary in Tokyo.
"At the end of the day, people want to cooperate with him in achieving his
objectives," Mr. Peterson said.
Todd Zaun reported for this article from Tokyo and Ken Belson from New York.