New Sony Gadgets Take Aim at Apple

via: Wall Street Journal

Threatened by Apple Inc.'s growing stable of portable devices, Sony Corp. is developing a new lineup of handheld products, including a smart phone capable of downloading and playing videogames, according to people familiar with the matter.

The Japanese electronics giant also is developing a portable device that shares characteristics of netbooks, electronic-book readers and handheld-game machines. The device is designed to compete against multifunction products such as Apple's coming iPad tablet, these people said.

Both the new smart phone and the multifunction device are expected to work with Sony's new online media platform, due to launch later this month in the U.S. as the company's answer to Apple's iTunes.

The new products are targeted for launch in 2010, although many details such as price and certain specifications have yet to be finalized, these people said.

Sony recently has struggled with portable devices. Its cellphone venture, Sony Ericsson, saw global shipments decline 41% in 2009, and last month Sony slashed forecasts for shipments of its PlayStation Portable, or PSP, game machine.

Sony's new media platform, temporarily named Sony Online Service, will offer many of the same movies, television shows and songs already available on iTunes. But the company aims to differentiate its service by allowing a wide range of devices to tap into its catalog of games, mainly older titles released for the original PlayStation console.

The new smart phone and other coming portable devices are critical elements of Chief Executive Howard Stringer's turnaround plan. Sony has made progress in cutting costs and streamlining its production, but it has yet to deliver a game-changing product that embodies Mr. Stringer's emphasis on creating devices that access an online network offering movies, games and music.

"That's the vision, but it's still not quite clear what specific steps Sony will take to achieve that, especially when iPad and other highly capable mobile devices are crowding the market," said Nobuo Kurahashi, a consumer-electronics analyst at Japanese brokerage Mizuho Investors Securities.

The new devices are meant to counter Apple and its wide range of products that connect to its iTunes store. Apple's iPod Touch and iPhone are pushing into the portable-gaming market inhabited by Sony's PSP, while the iPad tablet is expected to disrupt the nascent e-reader market where the Sony Reader has already sold one million units.

Sony is working with Sony Ericsson, a venture with L.M. Ericsson Telephone Co. of Sweden, on the new smart phone, the people familiar with the matter said. While the capital structure of the 50-50 joint venture hasn't changed, Sony is taking a more active role in developing handsets for the partnership because of how central smart phones are becoming to the company's overall strategy.

At a wireless industry trade show last month in Barcelona, Mr. Stringer said Sony Ericsson phones will connect to Sony's online service in the future.

He didn't specify what content would be available for mobile-phone users.

Sony Ericsson, which was formed in 2001, has lagged behind rivals in developing smart phones. It plans to introduce its first smart phone, Xperia X10, built on Google Inc.'s Android operating system in April.

The main responsibility for delivering Sony's gadgets of the future has fallen to Senior Vice President Kunimasa Suzuki, who was promoted as part of a management shuffle a year ago. He is in charge of Sony's Vaio computer business and the new team developing mobile products. He also serves as PlayStation chief Kazuo Hirai's deputy at both the videogame unit and the Network Products & Services division.

Mr. Suzuki's various roles within the company represent the blending of business divisions inside Sony, placing him at the center of Mr. Stringer longstanding ambition to bring down the "silos" separating the company's various operations.

Sony has said Mr. Suzuki is leading product planning for new mobile devices, without offering details about the projects. In early February, at a news conference to announce earnings, Chief Financial Officer Nobuyuki Oneda said Sony was interested in devices such as the iPad that don't necessarily fit any single product category.

Sony's next wave of portable devices comes as the PSP, a gadget once hailed by Sony executives as the "Walkman for the 21st century," is slumping.

While it has sold more than 55 million units since its launch in late 2004, the PSP hasn't quite lived up to Sony's own hype. Nintendo Co. has sold twice as many DS handhelds during that period and new games for the platform have slowed to a trickle.

Sony was forced in February to slash its full-year PSP shipment targets by a third. Sales of the PSP Go—the latest version of its handheld, which doesn't use packaged discs and only plays downloaded games—have been slow, hurt by the PSP Go's hefty price tag. It costs $250, or $80 more than the PSP model that uses game discs.While PSP Go sales have been disappointing, the handheld has taught Sony a lot about how it should approach future gadgets that will be entirely reliant on downloaded content, according to people familiar with Sony's thinking.
—Juro Osawa contributed to this article.