For Sony, a Good Time to Offload Struggling Vaio Business

As shipments fall, Vaio could be on the block

Struggling electronics giant Sony painted a rosy picture of its future at CES last month, but it will likely have to shed divisions that are battling intense headwinds.

Speculation has focused on its PC business, known for the Vaio brand, which is rumored to be up for sale.

Last week, Sony denied press reports that it was trying to sell its PC unit to Lenovo. This week, another potential buyer has been mooted: Tokyo-based investment fund Japan Industrial Partners (JIP).

The possible sale, reported in the Nikkei newspaper, would involve the establishment of a new company that would take over Sony's PC business. The price tag would be about AY=40 billion (US$394 million) to AY=50 billion.

"Sony has made no announcement in this regard," a company spokesperson said when asked about the Nikkei report.A "As Sony has announced previously, Sony continues to address various options for the PC business, but Sony has no further comments."

JIP did not immediately reply to enquiries about the report.

Sony's PCs have been struggling with consumers. Their market share has been shrinking, falling to 1.9 percent of worldwide PC shipments in the third quarter of 2013, down from 2.3 percent a year earlier, according to data from IDC. Ranked ninth, Sony shipped 1.5 million units during the quarter, down from 2 million a year before.

PC sales in general are down as smartphone usage climbs. Worldwide PC shipments fell 9.5 percent in the third quarter of last year, according to IDC, down for the sixth consecutive quarter.

That contrasts starkly with glowing smartphone numbers. Smartphone shipments topped 1 billion units for the first time in 2013, up 38.4 percent from 725 million units in 2012, according to IDC's Worldwide Quarterly Mobile Phone Tracker.

Selling the Vaio unit would be a no-brainer for Sony, which reports its third-quarter earnings results on Thursday.

"Their PC business has about $4 billion in annual revenue," said Damian Thong, an analyst at Macquarie Securities in Tokyo who thinks the Nikkei report is credible.

"Their handset business is tracking to almost three times as large revenue-wise," Thong said, adding that he estimates that Sony will lose about AY=30 billion on PCs this year.

"Sony has not confirmed a sale, but basically this would be a positive management decision," said Keita Wakabayashi, a senior analyst at Mito Securities. "As you know, the PC industry has been struggling and Chinese makers have increased their market share. The industry has become focused on price competition."

It's unclear whether Sony will continue to make products in the Vaio brand, which was emblazoned on Sony PCs starting in 1996.

Sony's first 8-bit personal computer was the SMC-70 from 1982. The first Vaio PC was 1996's PCV-90, which ran Windows 95 on a Pentium 200MHz processor. The first Vaio notebooks appeared in 1997.

Recently, Sony has debuted the Vaio Fit 11A Flip PC, an 11-inch Intel quad-core notebook that converts to a tablet. It follows the launch of the Vaio Tap 11 Windows 8 tablet and the Vaio Tap 21 21-inch slate, which also runs Windows 8.

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