Interesting article from Forbes, they talk mostly about TV's but electronics as a hold. The Pride That Killed Sony Benjamin Fulford, 11.05.03, 7:00 AM ET TOKYO - The once seemingly-invincible Sony has stumbled during the stewardship of Chairman and Chief Executive Nobuyuki Idei. Sales and profits have plunged and the company has been forced into a major restructuring. Idei spent so much time thinking about telecommunications and the Internet that he ignored the company's core electronics division and key products like televisions. The poor state of Sony's electronics was on display for all to see at the recent Ceatec Consumer electronics show in Tokyo. Its competitors had huge displays chock-full of innovative products, notably flat panel TVs, 3D displays, hard disk recorders, mobile devices, home servers, fuel cells and more. Sony's modest booth had at best one product that the other consumer electronics companies envied: the PSX, a combination DVD recorder and PlayStation 2. To those who have visited Ceatec over the years, the weak Sony (nyse: SNE - news - people ) display was in sharp contrast to the overwhelming shows of previous years. Precious management resources have been spent on things like Sony's mostly failed efforts to set itself up as a broadband internet provider in Japan and similarly failed efforts to become a major internet presence. Sony has suffered from hubris, the pride that kills. Several years ago, a Sony executive told me that because it no longer had "any real competitors" it must concentrate on its "creative dreams." No longer. On October 28, Sony held a press conference, in a hall filled with over 1,000 journalists, to announce a major restructuring to cope with plunging sales and profits. At the same time, at a smaller venue, Sony's arch-rival, Matsushita Electric Industrial (nyse: MC - news - people ), announced that profits for the fiscal half-year ending in September were up 59%, a sharp contrast with Sony's 51% plunge for the same period. "I am surprised Sony made the restructuring announcement at the same time as Matsushita announced its results; in previous years they would not have cared what we were doing," said Yukio Shohtoku, head of Matsushita's international operations. At the Sony conference, a Sony executive recalled how the flat-screen TV was a dream until Sony produced it. He was referring to the Trinitron and Wega flat-screen cathode ray tube televisions that once made Sony king of the living room. These production lines are now being restructured because consumers have moved on to thin, hang-on-the-wall TVs, notably plasma TVs made by Matsushita and LCD TVs made by Sharp (otc: SHCAY - news - people ). The former king of TV was forced to ally itself with Samsung, a Korean upstart, to keep its hold in the TV business. What is true of TVs has become true of many business lines. For years consumers were willing to pay a premium for the Sony name. Recently, however, more and more of them have realized the name is not giving them extra innovative value. Vaio computers, for example, use basically the same components as computer makers in Taiwan and elsewhere: chips from Intel (nasdaq: INTC - news - people ), software from Microsoft (nasdaq: MSFT - news - people ), DRAM and hard disks from a limited circle of makers. There is nothing to differentiate a Vaio except snazzy design. Sony's high cost base--its well-paid, lifetime employees in Japan--means it cannot compete on price. Other products that have generated much media attention, like Sony's robot toys, have yet to become big business. Apart from PlayStation 2, there is no truly unique Sony blockbuster product to justify higher prices anymore. There is an upside to Sony's stumble, however. The shock of having once-derided competitors grab market share from it across a broad range of products means that Sony is no longer complacent. It will cut 20,000 employees, reduce its supplier base to 1,000 from 4,700 and slash the components it uses to 100,000 from 840,000. It is also focusing many more management resources back on the core electronics business and away from fuzzy Internet dreams. Sony still has one of the world's best concentrations of top engineers and brains. Once Idei rides off into the sunset as an 'adviser,' the maverick Ken Kutaragi, creator of PlayStation and PlayStation 2, is expected to take over. This could happen in 2005 as PlayStation 3, the broadband super computer on a chip, hits the markets around the same time broadband communications becomes widespread. Kutaragi, who gets on notoriously badly with Idei (he once told me he stopped reading a Wall Street Journal article about himself as soon as he saw the name Idei in it), hopes to lead Sony as it pioneers entirely new types of entertainment that mix Internet, TV, games and movies.