Sony Corp.

Dec. 21, 2004
Latest moves: the stunning new PlayStation II and a continuing corporate restructuring.

In March Japan's Sony Corp. played two cards that will help secure its future. One was a reorganization that will pare about 10% of its workforce (about 17,000 workers) by Mar. 31, 2003. The plan turns three subsidiaries into wholly owned units and creates five in-house companies. The intent, Sony President Nobuyuki Idei, told Bungei Shunju (a Japanese publication) is to "see Sony grow by means of business units that are increasingly managed independently while interacting in a complementary fashion." Analysts note that under the Japanese system independently run units spotlight the money losers, and such a business structure also provides a more acceptable cultural basis for corrective action, such as employment cutbacks, for poor performers. The second card, the announcement of the new PlayStation II to game developers, is the strategic equivalent to having a technological playing deck with 10 aces, says Richard Doherty, director of research at the Envisioneering Group Inc., a technology-testing and market-research organization in Seaford, N.Y. He describes the new PlayStation as far more than a competitive strategy aimed at keeping Sony's share of the game market (about 58% versus Nintendo at 39% and Sega at about 3%). Doherty describes the PlayStation as the most significant breakthrough in computer-graphics technology in the last five years. The PlayStation, which will be on store shelves next year, massively increases the quality and performance of graphics technology to the maximum that can be enjoyed on a TV set, says Sony. With data-processing abilities that far exceed those of today's PCs and workstations, the PlayStation II offers performance that until now had been possible only on supercomputers. Measured in calculations per second, Sony says the PlayStation II is capable of 6.2 billion versus 0.4 billion for the Pentium II or 2.0 billion for the Pentium III. Using a chip called the Emotion Engine, the PlayStation can generate words, characters, behaviors, and complex physical simulations in real time via massive floating-point processing power. Intended as the successor to the PlayStation that was introduced in 1994, the advanced technology of the next-generation system provides the basis for a new era of in-home digital entertainment and possibly quite a bit more, adds Doherty. Sony carefully emphasizes that the design intent was not to compete with Wintel technology in executing the tasks of traditional PCs. Instead, the processing power allows for new types of computer entertainment to be created, says Sony. The PlayStation's strategic potential also is amplified by its ability to be a natural extension of the Internet. It fits into a future of spectacular graphics and other mathematics-intensive tasks. With the PlayStation's processing power, the hair and clothing of a game character can be affected by a digital wind calculated and processed in real-time. Other examples include the dynamic simulation of real-world physical attributes such as gravity, friction, mass, and the accurate simulation of different materials such as water, wood, metal, and gas. That will change the future of computer entertainment forever. Sony calls the concept Emotion Synthesis, to emphasize the system's unique ability to simulate not just the way images look, but also the way characters and objects in a game think and act. Imagine walking into the screen and experiencing a movie in real time. That is the virtual-reality world Sony is beginning to open for game players -- and to many other applications if analysts, including Doherty, are right. One wager behind this impressive tour de force is a $2 billion investment to produce the key element, the Emotion Engine. Sony calls it the world's first full 128-bit CPU. Jointly researched and developed by Sony Computer Entertainment Inc. and Toshiba Corp., the chip will be produced as a joint venture using new production lines within existing Toshiba clean-room production facilities in Oita, Japan. In 1986 a Sony founder, the late Masaru Ibuka, remarked, "One of our most important jobs is determining how to apply the latest developments in electronics to new consumer products." With the PlayStation, Sony is demonstrating its capability in developing as well as applying technology.

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