Letter to Shareholders: A Message from Howard Stringer, CE

Sony’s Transformation
We entered fiscal year 2009 with the daunting challenge of restoring Sony to profitability following the prior year’s substantial operating loss, and bringing about change that would not only sustain consistent profitability, but would deliver growth opportunities and new user experiences to customers in order to further enhance Sony and its brand.

Much has changed over the past year, brought about by the efforts and perseverance of the management team and the entire Sony Group, unified in common purpose, in the face of the most challenging global business environment in a generation. The year began with the implementation of fundamental changes in our organizational structure and processes. Our core electronics and game businesses were reorganized in order to better respond to both the increasingly competitive market landscape, as well as our increasingly savvy customers.

The Consumer Products & Devices Group brings together our traditional and vital hardware, including televisions, digital cameras and video cameras, as well as our key devices including image sensors and batteries. This group was established to enhance product competitiveness and improve operations in order to generate and sustain profitable growth.

The Networked Products & Services Group is comprised of our game business, VAIO™ personal computers, other networked mobile products and our network services. The mandate of this group is to accelerate innovation of our networked products and services to deliver new and exciting user experiences to our customers.

Key to our new structure are three horizontal platforms—the Global Sales and Marketing Platform, the Manufacturing, Logistics, Procurement and CS (Customer Service) Platform, and the R&D and Common Software Platform—which have enabled us to streamline operations, accelerate decision making, boost efficiency and reduce costs.

These changes were designed to transform Sony into a more agile, competitive and successful company, one that is in tune with the needs and desires of today’s global, digitally savvy and interconnected consumers. They were also intended to enhance our ability to pursue opportunities in new markets aggressively and to integrate content, software and services with our hardware successfully, to deliver rich and seamless entertainment experiences that differentiate us from competitors.

While our reorganization is a vital part of our transformation going forward, we also needed to attack our cost structure immediately and urgently and secure a better financial footing. Our swift and wide-ranging actions will help enable us to fund the innovation required to drive our future growth.

Specifically, we undertook the difficult but necessary task of reducing headcount and closing or consolidating eleven manufacturing sites worldwide, and we have announced plans for further reductions. With the new management team driving quick decisions in these and other areas, I am pleased to report that we beat our target and achieved more than ¥330 billion of Groupwide cost reductions in fiscal year 2009.

In addition, we have—for the first time in the company’s history—consolidated the purchasing power of all of our electronics and game component purchases. By doing this, we were able to substantially reduce our number of suppliers, and we are well ahead of schedule to achieve our target of reducing this number by half by March 2011. We have also almost achieved our target of a 20%—or nearly ¥500 billion—reduction in our annual procurement costs.

Finally, we aggressively managed inventory and accounts receivable and payable, which resulted in an improvement in our cash flow and financial positioning, which enables us to pursue strategic initiatives more effectively.

Our marketing initiatives are another important part of our transformation. Given today’s competitive business landscape, we must introduce our product lineup to consumers more dynamically and directly. To this end, our new Global Sales and Marketing Platform is reaching new customers in new geographies by reinventing our retail strategy on a global basis, entering new markets, and penetrating existing markets more deeply. The greatest tool that will allow us to accomplish all of this is the Sony brand.

To help guide Sony and its brand through our ongoing transformation, we have launched a unified brand message, “make.believe”, for the Sony Group and delivered a global launching campaign. “make.believe” reflects Sony’s ability to turn ideas into reality and, more importantly, to help consumers turn their own ideas into reality—as we believe that anything you can imagine, you can make real. Sony aims to inspire consumers around the world with innovation and fun through our unique combination of technology and entertainment based on our electronics, game, motion picture, music, mobile phone and network services businesses.

I want to assure you that our process of transformation is continuous—we are always looking for opportunities to be faster, more efficient, more creative and more aggressive. We continue to drive costs out of the company, to rightsize it for the competitive environment in which we operate, and to improve our ability to generate sufficient returns on our investments for our shareholders. ...

Visit Sony Annual Report 2010 Download Page

make.believe (“make-dot-believe”) is the Sony Group Brand Message

make.believe symbolizes the spirit of our brand. It stands for the power of our creativity, our ability to turn ideas into reality and the belief that anything we can imagine, we can make real.

The Sony brand ranges from electronics to entertainment, it reaches continents and cultures, and touches the lives of more people in more places and more ways than ever before.

Contents
Financial Highlights
Letter to Shareholders
Special Feature: Vision—The 3D World by Sony
Special Feature: The Rapidly Expanding Digital Book Market
Business Overview
Review of Operations
Board of Directors and Corporate Executive Officers
Financial Section
Stock Information
Investor Information

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