- The Washington Times - Thursday, April 7, 2005

TOKYO — Ken Kutaragi, whose name is often paired with “geek” and “genius,” seemed to many a logical choice to take Sony Corp.’s helm as it struggles to turn around its stumbling electronics business.

He is, after all, known as “Father of the PlayStation” for siring the industry’s most popular video game console.

And Mr. Kutaragi’s latest creation, the handheld PlayStation Portable, is hot. An estimated 3 million have been sold since it was released in Japan in December and the United States last month.

But instead of ascending in the dramatic management reshuffle last month that put Howard Stringer in the chief executive’s chair, Mr. Kutaragi was demoted.

Not only was Mr. Kutaragi passed over for the Welshman who had overseen Sony’s music and movie businesses, he also lost his seat on Sony’s board. Though he still runs Sony Computer Entertainment Inc., the company’s game subsidiary.

It appears the 54-year-old Mr. Kutaragi’s outspoken nature, in a corporate culture that’s oiled by consensus, may be to blame. Independent and shockingly frank by Japanese standards, Mr. Kutaragi hasn’t held back from criticizing company decisions.

In January, he told the Foreign Correspondents’ Club in Tokyo that fellow executives had been overly restrictive in controlling Sony content in a world where consumers of digital movies and music want hassle-free access.

Asked what he would do if he were running Sony, Mr. Kutaragi said the company must revive its original innovative spirit, when it boasted engineering finesse with the transistor radio, Walkman and Trinitron TV.

Sony also has been hurt by its insistence on making its content proprietary, Mr. Kutaragi said.

Some employees, he said, have been frustrated for years with management’s reluctance to introduce products similar to Apple Computer Inc.’s IPod portable music player, mainly because Sony’s music and movie units were worried about content rights.

Indeed, Mr. Kutaragi’s comments came about the same time that Sony decided to finally agree to support the open and widely used MP3 digital audio standard on its portable music players.

It’s not clear whether Mr. Kutaragi, who declined to be interviewed for this story, was punished for speaking out. But it is clear that consensus builders — though he doesn’t speak Japanese, Mr. Stringer is known for diplomacy — were chosen over potentially divisive critics.

Mr. Kutaragi’s blunt manner may have been seen as problematic when the sprawling company, whose core electronics business has suffered amid its expansion into entertainment, desperately needs cohesion and revitalization. Sony’s stock has fallen about 70 percent over the past five years.

Ryoji Chubachi, a production and electronics expert who became president in the March 7 reshuffle — making him No. 2 behind Mr. Stringer — later publicly praised Mr. Kutaragi as a talented engineer but hinted that top Sony executives didn’t believe he was suitable for managerial leadership.

“I respect him as an engineer,” Mr. Chubachi, 57, told journalists recently. “In the area of semiconductors, I consider him my teacher.”

Outgoing Sony Chief Executive Officer Nobuyuki Idei didn’t say why Mr. Kutaragi was passed up, but did characterize Mr. Chubachi as “a good listener” at a recent press conference.

Mr. Stringer said he still views Mr. Kutaragi as a key person at Sony, instrumental in the next-generation video game console dubbed the PlayStation3, or PS3, which is expected to be released next year.

“Obviously PS3 is a vital device for the company going forward. So I am under no illusions about the value and importance of Kutaragi-san,” Mr. Stringer said, using the Japanese honorific “san.”

Mr. Kutaragi, who joined Sony in 1975, broke away from Sony’s mainstream thinkers in the 1990s to work on the PlayStation. At the time, the company was filled with skeptics about the potential of video gaming, but Mr. Kutaragi proved them wrong, turning the business into a cash cow.

Another widely held view about Mr. Kutaragi’s demotion is that he had to share in the responsibility for Sony’s failures.

Battered by competition from cheaper Asian rivals, seen in the dramatic rise of South Korea’s Samsung Electronics Co. Ltd., Sony has been in deep trouble in recent years. It fell behind in flat-panel TV sets and got beaten up by the IPod and Apple’s ITunes online music store.

The PSX, which combined the PlayStation2 console with a DVD recorder and player, has bombed since going on sale less than two years ago. It was never sold outside Japan and Sony won’t disclose PSX sales figures.

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