Sony in £8bn drive to regain market lead in electronics

Sony, the world's second largest electronics company, could become the target of a takeover if it fails to hit its latest turnaround targets, analysts said yesterday. The warnings came as the Japanese company unveiled a ¥1.8 trillion (£8.6bn) investment programme focused on new technology and emerging markets, designed to return Sony to its position as the number one supplier of consumer electronics.

Sir Howard Stringer, the British businessman who became chief executive of Sony in 2005, said a three-year restructuring programme, which has seen the loss of 10,000 jobs and the sale of assets worth ¥120bn, had returned the company to profitability. But he conceded that Sony's target of achieving an operating margin of at least 5 per cent by March this year had been missed. The company will now aim to raise its return on equity to 10 per cent by 2011.

The target will be achieved, Sony said, by a new focus on emerging markets, including Brazil, Russia, India and China, as well as a drive to overtake Samsung as the leading manufacturer of flat-screen televisions.

"[We] believe the largest growth opportunities exist outside the traditional markets of Japan, North America and Europe," the company said.

It also expects to launch more interactive internet-based services, with, for example, plans to start delivering television and films directly to owners of its Bravia TVs in the US, bypassing cable and satellite services. Movie downloads for the Playstation 3 console should also become available this year.

However, Amir Anvarzadeh, director of Japanese sales at the investment bank KBC, said the company was still being squeezed by competitors. "Where are the killer products that made Sony?," he said. "All I see is that their products are being marginalised by Nintendo and Apple."

The Playstation 3, in particular, has been a major disappointment for Sony, failing to follow the huge success of early models of the console, with sales eclipsed by cheaper rivals such as Nintendo's Wii. The company has also lost its once dominant position in the portable music player market, losing out to Apple's iPod.

Sony's failure to identify a modern must-have consumer product – as its Walkman once was – is at the heart of the company's problems, said Atul Goyal, an electronics analyst.

"There is no product or business that can provide sustainable profits growth," he warned.

Mitsushige Akino of Ichiyoshi Investment Management said that failure to hit the 10 per cent target could cost Sir Howard dearly. "The target is a sign of Sony's sense of crisis that it could really become a takeover target," he said.

However, Sir Howard said he was confident that Sony's recovery was well underway. "We been trying to restore profitability, the work is not completed," he said. "Sony will be united, Sony will succeed," he said.

Koya Tabata, a Credit Suisse analyst, said there was scope for optimism, with Sony selling 200 million products a year, twice as many as Apple. "There is potential for growth because of the scale of Sony's platform," he said, "but more time is needed."