It’s a Sad Day for the PC Industry

Sony announced today that it is shutting down its worldwide PC business and selling it off to a Japanese investment firm that will maintain the business in that country. Of course, the trends in the traditional PC business have been difficult for the last few years, but in general we believe Sony’s problems (to the extent there really were problems) are more self-made than a function of the industry troubles.

Sony has always had a mixed approach to its PC business but their primary focus was on design. Sony tried to take advantage of its brand strengths for years built the coolest, smallest, most compact SKUs that appealed to, and were priced for, the premium customer and were successful as “executive jewelry” type of products. Yet they had trouble balancing the need for volume and scale with their ability to lead the market in design and appearance. This challenge was reflected in a constant back and forth movement between a focus on the premium segment and then sometimes a focus on the basic volume segment. As a company they were never willing to commit to winning in both segments at the same time. The result was a brand that was always facing limited shelf space, lack of presence in key market segments, and an inconsistent approach that confused customers and retailers and didn’t use their considerable brand strength to its advantage. In many ways this mirrors the long-term challenges Sony has faced in their TV business; how to be a premium brand in the segments that demanded it, how to be a volume brand when the market required it, and how to manage between those two opposite demands in a way that allowed both to leverage their brand strength.

Sony has not been unsuccessful in the PC business, especially recently, which makes this more puzzling. We would argue that Windows 8 actually provided an opportunity for Sony as a premium on design and product, especially around touch, has been positioned as an important part of the Win 8 market. With well-designed interesting products like the VAIO Flip and the VAIO Tap, Sony has found success. For the first nine months after the Windows 8 launch Sony was the number two touchscreen notebook brand over $500, clearly their sweet spot, with 17 percent of the market and an average price of over $900. However, as prices have fallen over the back half of 2013 Sony fell back into its old product mistakes, not defending its core market well and unable to find a way to build on its early mover success, falling back to just 8 percent share over the last six months.

While we are never fond of product decisions made by financial criteria, we find this decision to be particularly troubling, and one that is likely, ultimately, at least in the US to be decidedly unsuccessful. Shifting focus onto tablets and smartphones is all well and good however the synergy; in distribution, in design and in branding between those segments is undeniable (especially here in the US and among the higher value products Sony favors). And Sony’s total lack of success here in the US in those segments is not likely to improve without a PC business alongside. Ultimately though another company with demonstrable strengths and a unique position in the market has chosen to give up rather than compete. And that makes it a sad day.

Speak Your Mind