Sony Chases Apple's Magic

Even with a former Steve Jobs lieutenant driving innovation, Sony still hasn't captured its rival's cool

With Stringer's support, Schaaff has managed to break down silos and persuade rival factions to cooperate

Sony Chief Executive Howard Stringer bristles every time he gets the question: Why can't the Japanese electronics giant be more like Apple? The maker of the iPod, iPhone, and Mac computers consistently delivers supercool gadgets that are easy to use, while Sony sells music players, TVs, and cameras that get mixed reviews and often don't even work well with other Sony (SNE) products. "Sony is a very big company," Stringer says by way of explanation. "Our toughest competitors are niche organizations."

Stringer is quick to admit, though, that Sony may face a troubled future if it can't rival Apple (AAPL) in creating simple software that makes its gadgets fun and in giving consumers easy access to music and videos. Apple's iTunes store has long made filling iPods a cinch, but Sony's consumer electronics and PlayStation divisions have only recently started to integrate their offerings with those of the company's movie studio and music label. That's one likely reason why Sony's products earn profit margins of 10% or so, compared with the 30% margins that Apple's devices command.

So Stringer went straight to the source. Three years ago, he hired Tim Schaaff, a top lieutenant of Apple CEO Steve Jobs, and created the title of senior vice-president for software development for him. Although Schaaff was expected to spend most of his time in California, he's so integral to Stringer's plan to remake Sony that he has a direct reporting line to the CEO. Schaaff's role has grown quickly, and today he also has a hand in product design, licensing, planning, and engineering. "When we brought Tim on board, it was a recognition that we needed someone whose experience crosses multiple borders," Stringer says.

A KNACK FOR KILLER PRODUCTS

Schaaff doesn't come across as an agent of change. The 48-year-old Dartmouth grad studiously avoids the press. When he speaks, he does so slowly and deliberately, giving the impression that he is reading from index cards inside his head. But at Apple, Schaaff showed a knack for translating geeky ideas into killer products. The self-taught software engineer oversaw development of Apple's QuickTime video-streaming format, which serves as the foundation of iTunes, the iPod, and the iPhone.

Stringer is clearly hoping Schaaff can seed Sony with Apple's Silicon Valley entrepreneurial culture. When the Welsh-born Stringer became Sony's first non-Japanese CEO in early 2005, he pledged to make the company "cool again." While Schaaff has made important strides toward that goal, Sony clearly needs to inject some zing into its products. On Oct. 29 the company said net earnings for the quarter ended Sept. 30 were off by 72% from the year-earlier period. The report came on the heels of a warning that profits for the year would fall by more than half, due to the strengthening yen and lackluster sales of TVs and digital cameras.

It was more evidence that after a three-year makeover, Sony is still struggling to get its groove back. Now, as consumers rein in spending, they're even less likely to buy the expensive gizmos Sony plans to unveil over the coming months. That would be a major setback for "Sony United," Stringer's program to turn the company's fractured family of products and services into a model of integration. The goal is to sell Bravia televisions that connect to the Web and download the latest Spider-Man movie, Walkman phones that offer tunes from Sony artists such as Beyoncé, and e-book devices that ask if you want to purchase that new John Grisham thriller.

Stringer has given Schaaff unprecedented freedom to conquer resistance and boost cooperation among Sony's myriad—and often warring—units. Schaaff has also served as something akin to secretary of state, working with other companies to help make Sony products more appealing.