The fact that Sony (NYSE:SNE) announced layoffs the other day is not all that unusual or remarkable. We are all in the middle of a global slowdown (or recession in some locales) and plenty of other companies ranging from Dow Chemical (NYSE:DOW) to Rio Tinto (NYSE:RTP) have seen cuts. Even the National Football League is cutting payroll.

What is unusual, however, is that a bloated payroll wasn't the fundamental issue with Sony. In fact, I wonder what the future looks like for this one-time leader of the consumer electronics space.

A History of Innovation, If Not Invention
Sony hasn't always been the first in markets (it didn't invent the transistor radio, nor the CD, nor the VCR or home gaming system), but the company has shown an uncanny knack for designing, engineering, and marketing products that people really want to buy. After all, products like the Walkman, Discman, and Playstation are legends in terms of their popularity upon release.

All of that has ultimately created a global electronics and entertainment giant with nearly $100 billion in sales about $21 billion in market capitalization.

But History Means The Past
I wonder, however, whether Sony has lost its innovative soul and its ability to really compete. If you think about a portable music player, you probably think of Apple (Nasdaq:AAPL) or SanDisk (Nasdaq:SNDK), and in future years you might think of Nokia (NYSE:NOK). Likewise when it comes to TVs, DVD players, or gaming systems - Sony still gets its piece of the pie, but companies like Samsung and Nintendo (Nasdaq:NTDOY) seem to be more in tune with consumer tastes these days.

To some extent, this is understandable. The skills needed to build a successful business are not the same as the skills needed to maintain a large global enterprise - something that I suspect returning founders like Michael Dell (of Dell (Nasdaq:DELL)) and Howard Schultz (of Starbucks (Nasdaq:SBUX)) are going to find exceptionally frustrating.

Building a cool new business is about taking risks, hyper-focusing on particular markets and responding quickly to changing tastes and consumer whims. Managing a huge global enterprise is more about achieving stability, meeting investor expectations, catering to as much of a mass-market audience as possible and trying to guide/shape/create consumer whims.

Has Sony Lost Its Touch?
Sony is clearly facing some meaningful challenges. Competitors are popping up all around the world, the return on equity hasn't been good for almost a decade, and a global economic slowdown is going to mean less disposable income for the gadgets, games, and other diversions provided by the company.

However, it is equally clear that consumer electronics can be very profitable. Apple produces excellent returns on capital, and even though Dell is widely seen as struggling, it, too, is exceptionally profitable.

What many of the success stories share (and I'm including Nokia in this list) is a high degree of focus. By and large, these companies do a small number of things and do them well ... and if they realize they can't do them well (or profitably enough), they get out of the business and move on to a new idea.

While Japan has a fine tradition of huge conglomerates in numerous industries, I question how well that approach works in consumer electronics (witness General Electric's (NYSE:GE) multi-year multi-stage abandonment of the consumer electronics space). If you've ever worked for both a large and small company in your career, I think you'll agree with me that there's a major difference in how quickly decisions can be made, how readily change can occur, and how much employees truly feel a part of the process.

Bottom Line
In short, I think Sony is too big to thrive. Sure, management may be able to cut some costs here and there and huge R&D budgets suggest a continuing flow of new products (at least some of which are statistically likely to be blockbusters), but great success cannot come to bureaucracies and committees.

Sony doesn't throw enough cash for income investors, is nowhere near dynamic enough for growth investors, and doesn't seem committed to the radical process of spin-offs, divestitures, cost-cutting, and reshaping to appeal to turnaround investors.

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