A pair of tired tech titans, namely software maker Microsoft (Nasdaq: MSFT) and electronics maker Sony (Tokyo: 6753), are making new pushes in the Chinese instant messaging (IM) and gaming spaces, as each tries to remain relevant in the fast growing market. Both of these companies are struggling for direction not only in China but also globally, with each recently seeking new leadership in a bid to regain their former glory. Back on the China front, Microsoft is formally ending a longstanding local partnership in a bid to bolster its flagging IM services in China. Meanwhile, Sony is making headlines in gaming, one of its few remaining strong areas, with word that it plans to roll out its popular PlayStation consoles in China.
Both Microsoft and Sony count China as one of their largest markets, even though their names don’t create much buzz among local consumers these days. Microsoft’s flagship Windows computer operating system is fast becoming irrelevant with the rise of smartphones and tablet PCs; likewise, Sony is seeing a similar move as its traditional TVs get overtaken by other mobile and portable devices.
Microsoft has tried to remain relevant by moving into the Internet space, purchasing the popular Skype instant messaging platform in 2011 for $8.5 billion and combining that with its own MSN Messenger product earlier this year. In a somewhat strange move, Microsoft closed down MSN Messenger in every market around the world except for China, where it also continued to operate the Skype service through a 9-year-old partnership with Hong Kong company Tom Group (HKEx: 2383).
Now Microsoft and Tom have announced they are dissolving their partnership, and Microsoft says it wants to form a new joint venture to operate Skype in China. (Chinese article) Everything about this announcement hints at a lack of planning and direction by Microsoft, which seems to be its general strategy in China these days. MSN Messenger was once one of China’s most popular IM platforms, but has lately lost many of its users, including myself. Skype was never properly promoted under the Tom partnership, with a result that it has few users in China.
In the meantime, more aggressive and focused players like Tencent’s (HKEx: 700) QQ and now its WeChat services have quickly come to dominate the market, leaving Microsoft on the sidelines. The fact that Tom announced the dissolution of the Skype partnership before Microsoft had even identified a new partner reflects Microsoft’s broader disorganization; accordingly, I would expect any new Skype venture in China to be equally unsuccessful as the Tom alliance.
Moving on to Sony, the company’s recently named new CEO Kazuo Hirai has just made his first public appearance in China, where media focused on his comments that Sony plans to bring its PlayStation consoles to one of the world’s largest gaming markets. (English article; Chinese article) I can’t really blame Sony for coming so late to the market, since China until recently banned the import of foreign gaming consoles. Microsoft, maker of the Xbox gaming consoles, also said last month it planned to enter the market through a partnership with Shanghai-based BestTV (Shanghai: 600637). (previous post)
I said at the time of the first announcement that Microsoft’s move looked like too little too late, and I’ll say the same thing about Sony’s new plan. Hirai in his remarks didn’t actually focus too much on game consoles, which are one of the few bright spots in Sony’s fading product portfolio. But other comments from the event were equally uninspired, with another executive predicting Sony could post double-digit growth in China this year. That certainly doesn’t sound too exciting to me, but perhaps any growth is a good thing for a fading company like Sony.
Bottom line: Microsoft’s and Sony’s latest hazy plans for their instant messaging and gaming businesses in China reflect broader disorganization and lack of focus at both companies.