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Friday, June 27, 2008

Sony targets the emerging markets to increase return on equity in the next three years

The current fiscal year has been tough for Sony Corporation (TYO:6758), one of the largest consumer electronics company in Japan. All the major products of the company lost to its competitors. Its share price also fell at the Tokyo Stock Exchange. Now, the company is desperate to be back in business. Recently, in a press conference, Sony Corporation’s Chairman Howard Stringer announced to increase the companies Return on Equity (ROE) to 10% in the next three years and level the company’s profit margin with that of Samsung Electronics Co. Ltd.(SEO: 005935) and Nintendo Co.Ltd.(TYO: 7974) This new target is double the company’s current ROE level of 5.8%. Chairman Howard Stringer also failed to meet the earlier operating margin target. Bloomberg reports:

``Sony will lose its place as a global leader if its ROE stays lower than 10 percent,'' Mitsushige Akino, who manages $557 million at Ichiyoshi Investment Management Co. in Tokyo, said by telephone. ``The company will face enormous difficulty should it fail to achieve it.''

Return on equity, or profit divided by book value, measures the earnings generated on the investment by shareholders. Matsushita Electric Industrial Co., the world's largest consumer- electronics maker, plans to raise its returns to 10 percent by next fiscal year.

When asked about his strategy, Stringer said that his company will increase number of products that are sold online. Sony will also target the emerging markets such as, Brazil, Russia, India and China over the next three years. Sony will focus on its seven businesses in these markets.

Related article:
Bloomberg

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