Quick Take: Is Sony Really Turning the Corner?

I have no problem admitting I'm a Sony (NYSE:SNE) skeptic. I've experienced numerous quality problems with its electronics and PCs over the past decade, as have a number of my tech-savvy friends. That's why I wasn't surprised when Sony suffered a rash of recalls for laptop batteries it produced.

So yes, I'm biased when it comes to Sony (and I'm not alone).

Today, when I saw headlines about Sony expecting much better results next year, thanks to higher electronics sales and smaller videogaming losses, I immediately thought, "short-term improvement." Sony's line of LCD TVs is selling very well, but in a few years, Matsushita (NYSE:MC), Samsung (OTC BB: SSNLF.PK), Sharp (OTC BB: SHCAY.PK), and others will compete these gains away. This scenario will probably still play out, but having reviewed Sony's earnings presentation, I see the potential for enough strength across the business and the investment in research & development for electronics that I'm somewhat encouraged.

On the turnaround front, Sony has also made progress on reducing the number of models it needs to manage, shutting down excess capacity, and selling off assets that it doesn't need. Sony also has its electronics business operating margin up to its target of 4%. It still, however, has to get the overall operating margin up to 5%, but with losses from the gaming business set to decline this appears achievable.

That's not to say Sony is a slam dunk, even if the shares are up more than 5% today. Sony still has an uphill climb to regain share in the music player business from Apple (NASDAQ:AAPL), its movie business is volatile by nature, and the music business still needs to reinvent itself. But the financial health overall has reached a point where it is apparent that the turnaround is working. Sony can now focus on improving these businesses, not just on cutting costs. I have more digging to do, and I'm not sold on purchasing any Sony gear myself. But based on this first glance, and the higher value that consumers at large place on the Sony brand than I do, I think it's a mistake to completely overlook Sony now.

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Nathan Parmelee had no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.