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Once a Video Game Industry Titan, Sony (SNE) Losing its Gaming Grip


Sony (SNE) is a giant in the video game industry. To this day, the PlayStation 2 remains the best-selling console in history with almost 150 million units sold since its 2000 release. Microsoft (MSFT) has sold half of that with both its Xbox and Xbox 360 combined moving only about 75 million units. Video game industry titan Nintendo (NTDOY) has six of the ten best-selling devices, but still has not toppled SNE from the #1 spot. And let’s not discount Sony’s software influence, since its 1999 release of EverQuest helped spawn the entire MMORPG genre that has fueled Activision Blizzard (ATVI) and its World of Warcraft series.

But given the events of the past several years, it’s hard to call Sony a great video game company anymore. In fact, it’s hard to call Sony an ANYTHING company anymore. The media and electronics conglomerate has its fingers in so many pies that it can’t figure out what kind of brand identity it really wants.

Just this week, Sony acquired Media Molecule, the game defveloper behind the wildly popular puzzle game LittleBigPlanet that allows users to create their own challenges. This title for Sony’s portable PSP console has won scores of accolades — including 80 industry awards worldwide, 15 of which have been for Game of the Year categories.

So does that mean Sony is serious about staying on top of the video game industry? Think again. Just look at its other two mergers so far in 2010 and try to decide for yourself what direction the company is moving in:

In January, Sony acquired Convergent Media Systems. The Georgia company is a self-proclaimed expert in “digital signage and content distribution systems” and will be integrated into Sony’s broadcast and professional products business.

Then in February, SNE acquired iCyt Mission Technology as it entered into the “flow cytometery” marketplace. To anyone without a molecular biology degree, flow cytometry is a fancy way to say “cell sorting” where lab geeks put a sample in a high-tech gadget and that separates cells to make research easier.

So … an electronics company that sells entertainment as well as business content as well as research tools. Try writing a mission statement for that.

This failure to establish a brand with authority is a big reason that Sony has struggled during the recession. Specifically, it posted its first full-year loss in a decade in a half for fiscal 2008, and fiscal 2009 doesn’t look all that much better. Though the company posted improving numbers in its fiscal Q3 results released this February with its first quarterly profit in four periods, it’s hardly out of the woods. The few consumers who are willing to open their wallets are demanding the highest quality, or they are staying fiercely loyal to brands that have done right by them in the past.

It’s fine if Sony wants to scale back its video game hardware and software businesses and focus on doing a few things really well. Sony’s PSP is fading fast behind the juggernaut of the Nintendo DS handheld device. And with a new and improved version of the DS in development, the PSP’s days could be numbered as NTDOY flexes even more muscle in the video game marketplace it already dominates.

But unfortunately, Sony’s not just letting its existing electronics devices play second fiddle but it’s failing to come up with any clear area of expertise. Instead, it’s hoping that it can still ride the Sony name to profits in all corners of the electronics market.

SNE produces Bravia branded HD-TVs that are step down from those produced by Asian rivals Panasonic (PC), Sharp and Samsung. SNE produces a blandly named Sony Reader that is a meager substitute for the Kindle from (AMZN). And according to a recent Wall Street Journal report, SNE is planning on producing a knock-off of the Apple iPad.

Sony does a good job of capitalizing on consumer trends after the fact, but does it really want to be a company that just puts out second-rate alternatives to everything? “Jack of all trades and master of none” is hardly something to aspire to in an industry that places a premium on innovation.

Rather than arrive late to the train for the next big gadget movement, Sony execs need to put more into R&D and worry about getting ahead of the curve. 

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