Analysts say that Japanese consumer electronics giant Sony will report full-year operating losses for the first time since 1995 during an earnings call later this month. The news comes on the heels of seven years of missed earnings. So why do I think the company is poised for a massive come-back?
Apple's finances were in the toilet back in 2001, too. The company struggled to make even a modest profit most years during the 1990s. By January, 2001, Apple was barely squeaking by in profitability, and seem to be a company firmly stuck in the past.
But during that year, Apple introduced Mac OS X, its first retail Apple stores and the iPod. These announcements served as the foundation of Apple's rise to dominance of both consumer electronics and digital music, and also fueled massive growth in PC market share. From 2001 to 2008, the company mostly did everything right. Its products, from desktop systems, to all-in-one systems to laptops to iPods dominated the "high end" of computing and consumer electronics. Its iTunes Music Store and Apple Store programs hit on all cylinders every year since launch.
An ill-informed investor in 2001 might have considered Apple some kind of washed-up has-been. But by looking at their actual products, you could have predicted Apple's rise to dominance.
Likewise with Sony. The company is struggling financially. But look at their products. The Sony we all once knew and loved -- the innovator of elegance -- is back with a vengeance. Let's look at the lineup.
While nobody was looking, Sony's Vaio line became the best overall offering of Windows-based laptops in the industry, from the awesome, 18-inch screen Blu-ray Vaio AW system to the tiny Vaio P just announced at CES. All these systems have Mac-like, rather than PC-like, keyboards, plus superior sound systems and screens, and good prices.
Sony's new DSC-G3 Cyber shot digital camera is a perfect example of how Sony is innovating in all the right ways. The 10.1 megapixel pocket-size camera sports Wi-Fi capability and free AT&T Wi-Fi access. The camera has a real Web browser and on-screen QWERTY keyboard. Big buttons on its giant LCD screen let you qickly upload pictures and videos via Picasa, Photobucket, Shutterfly, YouTube and Daily Motion -- directly from the camera.
Over the past two or three years, Sony's Bravia line of LCD TVs has become the Gold Standard.
While Amazon.com sells the dominant e-book reader, Sony's Reader is considered successful and superior as a device to the Kindle. As eBook readers come into their own, and carriers start selling them in retail stores, it will become a two-horse race between Amazon.com and Sony.
Similarly, Sony is shipping solid, elegant, high-end PCs, camcorders, home theater and Blu-ray systems, media players, car audio and GPS systems and cell phones.
And don't forget, Sony is also a major movie and television company with its Sony Pictures business.
Sony will announce earnings for real later this month. If it announces the loss, as expected, it will be mainly because of holiday sales getting clobbered by the recession, and also the errors and blunders of the past decade.
But if anything, the recession boosts Sony's long-term prospects, because it will almost surely do what recessions usually do to markets with thousands of players: It will kill off most of them.
When the dust clears on the recession in a year or two, Sony will emerge, along with Apple and a couple of other dominant players, as one of the few companies still standing. And if current product trends continue, Sony will have best-of-breed gadgets in nearly every business it plays in.
Like Apple in 2001, Sony has re-discovered the truth that ultimately it's product quality and innovation that matters.
When Sony does announce dismal earnings later this month, don't let it fool you. Sony is on the brink of rediscovered greatness.