Sony Execs Frank On CE's Q4 Outlook

Glasgow, Vandenbree see good, but not major, growth in the fourth quarter

By Steve Smith -- TWICE, 12/1/2008

NEW YORK — Sony sees opportunities for itself in the bleak economic environment and spoke bluntly about the condition of Circuit City as well as consumer confidence during this troubled holiday season.

Stan Glasgow, Sony Electronics president, and Jay Vandenbree, Sony consumer sales president, did not provide gloom and doom about the current market but were frank in reaction to questions posed during the company's biannual media roundtable, held at the Sony Building, here, in late November.

Glasgow said that based on the "past 60 days" in discussions with retailers, Sony knew this would be "a challenging" holiday season. Based on the downturn, he expects "good growth" but not major growth in holiday sales and expected digital-SLR cameras, HDTV and Blu-ray to sell well. Vandenbree concurred, saying that the Sony Reader, 46-inch and 52-inch HDTVs and even 32- to 40-inch sets will do well.

Glasgow commented on the DTV transition and how it may affect holiday sales, noting, "People shop later and later every year. It used to be end of October or early November. Now it is late November and a strong January. The DTV transition will help since it will extend the holiday season ... we are counting on that."

When asked what happens after the transition is complete, Glasgow said, "The current household penetration is at 50 percent. We have a long way to go with HDTV, between larger screen sizes ... and new features. This is still a great opportunity for this industry."

Vandenbree noted, "When you look at recent results from RadioShack, people are buying plenty of set-top [DTV-conversion] boxes. At the end of the day the regular churn of [TV sales] will happen after the spike from February. And those set-top box owners, in a year or so, will go out and buy HDTVs."

But the major part of the discussion concerned the effects of Circuit City, the economy and consumer confidence on the CE industry.

Vandenbree said that Circuit City had $11 billion in U.S sales last year, "despite the issues it faced, so there is still an opportunity for Circuit City, or an organization that is like it that is different than Best Buy, Wal-Mart and independent retailers."

Sony was the third largest unsecured creditor in the Circuit City bankruptcy, with $60 million owed, according to the chain's filing. Glasgow said that Sony had regular meetings about the situation and anticipated what was happening at the chain "to protect Sony but also support Circuit City. We wanted to minimize damage to Sony without damaging Circuit City. We wanted to support them as best we could."

Glasgow was asked what would happen if Circuit City closes and whether it would mean Sony would expand its stores and manufacturers might enter retail. At first he said, "I don't see Circuit City going away," then quickly clarified, "I don't want to see it go away. Jay and I have seen in our years in the business that there hasn't been a successful transition out of Chapter 11 by a [major CE] retailer. It is going to be a real challenge. If it happens, competitors would absorb their business."

Vandenbree said he doesn't expect other manufacturers to open up their own stores "because not many have the breath of product to open retail stores." Sony's plans remain the same, he said. "We have 44 Sony Style stores now ... and our plan is to be in the top 50 markets with 60 stores. We collaborate with our retail partners. Retailers within 20 miles of a Sony Style location do dramatically better business that other [chain] locations without our stores. We bring consumers to our retail partners as well."

The challenge is to get consumers into stores, and Glasgow noted, "We are all shell-shocked and disappointed by the economy. We have asked our employees to go out and become aggressive and tell customers and consumers to go out and buy products."

He noted, "In a deflationary time period, prices on almost everything are going down. About 70 percent of the economy was based on consumer sales ... now 65 percent. There are great products in this industry, not all from Sony, but a lot of them."

Vandenbree said he's heard all the "doom and gloom" but added, "This is the time that you make investments to focus on the future. We feel at this point in time we are in a marathon not a sprint. We have no intention to pack bags and go home. We want to capitalize on our advantages."