How Tough Is The PC Market? Sony Would Rather Compete in TVs Than Notebooks

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By T.C. Doyle

Add Sony to the list of companies that have concluded that the best years for PCs have come and gone.

On Thursday, the struggling electronics giant announced that it would sell its PC business to Japan Industrial Partners (JIP). The move was part of a broader restructuring plan that came on the heels of an announcement by Sony that it expects fiscal 2014 results to be lower than previously thought. Much lower.

Instead of a modest profit, Sony now expects to post losses totaling as much as $1.1 billion for the year ending in March. The reason for the change, according to Sony, is greater-than-expected restructuring costs.

Telling The Wall Street Journal that the decision to sell the VAIO PC business was “agonizing," Sony Chief Executive Kazuo Hirai said it was nonetheless the right thing for the company. By shedding PCs, Sony can now focus on its core business, which, of course, is consumer electronics, including smartphones and game systems. Sony has also decided to keep its hand in HDTVs – a notoriously competitive business – that it will sell through a new subsidiary.

The decision to exit PCs was hailed by analysts and market watchers alike. In trading Thursday, shares of Sony rose by more than 3 percent.

Sony entered the market for PCs in 1997 with sleek and, at the time, innovative notebooks and laptops that came to rival Apple’s designs in terms of fit and finish. (The VAIO logo, which includes an audio sound wave and a ‘1’ and a ‘0’, was meant to symbolize the perfect blending of analog and digital technology.) While a hit with professional buyers with discriminating tastes, Sony PCs never caught on with enough resellers and solution providers to lift the manufacturer into the upper echelon of PC suppliers.

Sony’s decision to exit the PC business comes amid great uncertainty in the commodity hardware market. Why buy a full-powered PC when a virtualized desktop alternative or tablet computer can suffice? It’s a question millions of consumers have asked in recent years, resulting in tepid PC sales.

In December, market researcher IDC lowered its forecast for 2013 significantly. When final numbers are revealed, worldwide PC shipments are expected to be more than 10 percent below levels reached in 2012. Worldwide PC shipments are expected to level off around 300 million units per year — a far cry from the 400 million or so units that were predicted a mere few years ago.

This was before HP, Dell and Sony, which have lost billions of yen from PC operations in recent years, saw their fortunes decline due to the meteoric rise of thin-client computing and tablet devices.

Where the PC market is headed now is anyone’s guess. Lenovo, for one, is bucking the trend. Of the top five makers of PCs worldwide, it is the only one enjoying significant growth. Dell and Asus have experienced relatively flat sales in recent quarters, while HP and Acer have endured market-share losses.

Although it has gained from buying distressed business from NEC, Olympus and others, JIP is unlikely to single-handedly resuscitate the PC market. That’s not to say, however, that it won’t give Acer, Asus and Dell a run for their business. To challenge Lenovo, however, JIP will need a plan to disrupt one of the more mature markets in all of technology.

For all its effort, this was something even mighty Sony could never do.

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