News Column

Olympus Deal a Slow Cure for Sony

Oct. 2, 2012

Hiroko Nakata, Japan Times, Tokyo

In the end, Sony Corp.'s alliance in the medical equipment business with scandal-tainted Olympus Corp. will help the loss-making electronics giant, it's just a matter of giving it enough time, analysts say.

The two companies will set up a joint venture by yearend to develop endoscopes, focusing on a type used in keyhole surgery, they said in a statement. Sony will hold 51 percent of that venture and Olympus 49 percent.

Sony will also invest Y50 billion in Olympus, making it its single biggest shareholder, with slightly more than 11 percent of its outstanding shares.

At a news conference Monday, Sony President Kazuo Hirai said the group aims to exceed Y200 billion in sales in medical equipment in 2020.

"The medical equipment business is what Sony should target as a new growth sector because Sony can take advantage of its various technologies, particularly digital imaging and image processing," Hirai said.

He said it is a new challenge for Sony, which has specialized in consumer electronics and entertainment.

Sony also said the joint venture is looking to grab a greater than 20 percent share of the surgical endoscope and related market, estimated to be worth about Y330 billion in 2020.

"The alliance means Sony is aiming to reinforce its medium- and long-term competitiveness," said Osamu Kobayashi, an electronics-sector analyst at Standard & Poor's Ratings Japan K.K. "But it is likely to take time because it is not the type of business that can generate profits quickly."

Analysts said it will take time to get the OK from regulatory authorities to realize synergies from expanding the endoscope imaging sensor business.

"The medical business offers room for Sony to apply technologies cultivated by its electronics business, particularly digital imaging and video, and is an area that should be reinforced," Masahiro Nakanomyo, an analyst in charge of precision instruments at Barclays Securities Japan Ltd., said in a recent report.

Sony wants to speed up its move into medical equipment by taking advantage of its edge over rivals in image sensors. Sony's medical business has the potential to be one of its main profit drivers, Hirai said in April.

Sony said in August its group net loss in the April-June period widened to Y24.64 billion from Y15.50 billion a year earlier, weighed down by the strong yen and increased costs of restructuring.

Sony also said that it expects to book a group net profit of Y20 billion and an operating profit of Y130 billion on sales of Y6.8 trillion in fiscal 2012 through March.



Source: (c)2012 the Japan Times (Tokyo). Distributed by MCT Information Services


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