Three years ago Sony handed one of the business world's biggest fix-it jobs to Howard Stringer. He had been running Sony's U.S. operation for six years, but the choice was still unorthodox: Stringer was born in Wales, not Japan, and he wouldn't be moving to Tokyo when he took over one of Japan's most revered companies. The challenge was daunting: The electronics and entertainment giant was struggling with red ink and management paralysis. Stringer didn't profess to have the answers. "Look, I didn't know what I was doing," he says today.
But he knew where to look for help. Before he started, he read Who Says Elephants Can't Dance?, Louis V. Gerstner Jr.'s book about fixing IBM when it was a corporate dinosaur much like Sony. "You can read Gerstner's book and see a pretty good game plan" for turning around Sony, he says. "It is blindingly obvious, and if it weren't, I wouldn't have been able to do it." As Stringer works to transform Sony, he says he continues to tap Gerstner for advice: He's hired the former IBM chief executive as his personal corporate guru.
The self-deprecating Stringer seems to be just what Sony needed. He's relied on his sense of humor and personal charm--the kind that famously lured comedian David Letterman away from NBC when Stringer was president of CBS--to win over Japanese executives wary of an outsider but weary of the company's turf wars and lagging performance. His hard work and relentless travel--between Tokyo, his home in New York City and the home outside London where his wife and two teenage children live--are starting to show results. Sony has $10.8 billion of cash on its balance sheet and a slew of new products on shelves, including PlayStation 3, a high-end digital camera and a superthin TV that will star in the next James Bond film.
For years Sony persuaded consumers to pay a premium for its gadgets by inventing them first--think Walkmans and camcorders. Today it loads them up with superior technology, which produces clearer TV pictures or tells digital cameras to shoot when the subject smiles.
Stringer's goal is to connect its devices--televisions, music players, PlayStation machines--to one another and to a new Sony network for downloading movies, TV shows, games and other digital content. Downloading goes via the PlayStation 3 console, turning it into a home computer server that can handle movie rentals as well as play games. In addition, Sony's Bravia flat-screen TVs will allow viewers to connect to the Internet and stream Hollywood hits without a set-top box or cable subscription; already the TVs can do this with YouTube and other free Internet channels. Sony will send the new Will Smith movie, Hancock, to Internet-ready Bravia TV sets in November, before it can be seen on DVD or on cable. In Stringer's vision of the future, consumers will pay Sony first for televisions and other hardware, then pay Sony again to download movies, music and TV shows. "The battle for me is the networking of these devices," he says. "I have to succeed at that."
But how could Stringer get his devices talking to each other in a company whose executives were barely talking to each other? When he took over, Sony was so dysfunctional--and divisions guarded their territory so fiercely--that managers working for one division wouldn't return phone calls from their counterparts in another division. Cheerleading, cajoling, schmoozing over soccer games, Stringer talked about how far-flung units must battle Sony's competitors instead of one another. He pointed to the revenue Sony would reap if the company's different arms would cooperate on marketing. It sounds obvious, but his predecessors had failed to pull it off.
For Stringer it would take a crisis to finally galvanize his executives into pulling in the same direction: In the battle to replace the DVD Sony would beat back an assault by Toshiba (other-otc: TOSBF.PK - news - people ) on Sony's Blu-ray technology, the high-definition video format and the linchpin of just about every one of Sony's business lines. To get the best available picture quality, consumers will need to replace almost every video device they own--televisions, video players and video cameras.
Net profit for the year ended Mar. 31 was $3.2 billion, triple the previous year's, on revenue of $89 billion, up 6.9%. But the pretax, preinterest profit margin was just 4.2%, missing Stringer's 5% target and lower than that of rivals such as Samsung Electronics. "He's done a lot, but he's got a lot more to go," says Gerstner, who doesn't coach any other chief executives and initially turned down Stringer (who flew down to Florida and arrived at Gerstner's home holding a dog-eared copy of the IBM book before Gerstner agreed).
Two of the biggest messes inherited by Stringer--the TV manufacturing and PlayStation businesses--are still dragging down earnings, but he's promised Wall Street that both will turn profitable this year. The TV operation got in trouble because it didn't keep up with the latest technology and was slow to cut manufacturing costs by moving production to lower-wage countries. High development costs and missed deadlines have always plagued the PlayStation business as Sony's engineers tinker endlessly with each model. The powerful PlayStation 3, which uses an IBM-Toshiba-Sony chip that can do 256 billion calculations a second, costs $400 and was late coming to market. Outside videogame outfits have still designed only a limited number of games for it. But one PlayStation-only game released in June, Metal Gear Solid 4, has been driving sales of the machine. Sony expects to sell 10 million in this fiscal year, while holding prices steady, enough to put that business into the black. Morgan Stanley (nyse: MS - news - people ) says Sony might easily sell 14.5 million.
The company's adrs recently traded at $40.90 on the New York Stock Exchange, up 17% from when Stringer took over in June 2005, and Goldman Sachs (nyse: GS - news - people ), Deutsche Bank (nyse: DB - news - people ) and Morgan Stanley all rate the stock a buy. "Sony remains our top pick in the Japanese consumer electronics sector," says Goldman.
Stringer will draw on his unconventional background to implement his blueprint. A burly 66-year-old who studied history at Oxford, he immigrated to New York in 1965, only to find himself drafted. He fought for the U.S. in Vietnam, then returned to New York as a documentary TV producer for CBS News. After serving as Dan Rather's producer, he rose to president of the network. He became a U.S. citizen in 1985, yet Queen Elizabeth II knighted him in 1999. After a stint leading ill-fated tech company Tele-TV, he took a vaguely defined job as president of Sony Corp. of America in 1997. He tried learning Japanese but gave up. Within two years he was running the U.S. operation.
By that time Sony had been sliding for years. Sony engineers invented Betamax, only to see the cheaper VHS become the standard for videocassette recorders. Sony missed the move to flat-panel TVs while it championed its dated Trinitron TVs. It dreamed up the Walkman, but Apple (nasdaq: AAPL - news - people ) created the Walkman of the digital-download age, the iPod. Sony's net profit margin slipped to 1.2% in fiscal 2004, and the company decided it needed a turnaround--and needed a foreigner to pull it off. A transplant boss (Carlos Ghosn) rescued Nissan (nasdaq: NSANY - news - people ). Why not Sony? "Strange people get jobs in strange times," says Stringer. "I got this job in a crisis."
