How Sony Fell Behind in the Tech Parade THE lights dimmed. The crowd hushed. The teleprompters flickered. Kazuo Hirai stepped up and flashed a winning smile: it was show time. The scene was oddly upbeat inside the Sony Corporation last Thursday as Mr. Hirai, the company's new chief executive, faced the cameras. He outlined a strategy that, he vowed, would return the troubled electronics giant to profit. "The time for Sony to change is now," said Mr. Hirai, who formally took up the C.E.O. post on April 1. He posed for the cameras, one finger held high in a No. 1 sign. "I believe Sony can change," he said. Outside Sony - and inside it, too - not everyone is quite so sure. That is because Sony, which once defined Japan's technological prowess, wowed the world with the Walkman and the Trinitron TV and shocked Hollywood with bold acquisitions like Columbia Pictures, is now in the fight of its life. In fact, it is in a fight for its life - a development that exemplifies the stunning decline of Japan's industrialized economy. Once upon a time, Japan Inc., not to mention Sony itself, seemed invulnerable. Today, Sony and many other Japanese manufacturers are pressed on all sides: by rising Asian rivals, a punishingly strong Japanese yen and, in Sony's case, an astonishing lack of ideas. No one was terribly surprised last week when Sony announced that its losses this year would be worse than it had expected. Sony, after all, hasn't turned a profit since 2008. It now expects to lose $6.4 billion this year. The reason is plain: Sony hasn't had a hit product in years. The verdict of the stock market has been swift and brutal. Sony's share price closed at 1,444 yen ($17.83) on Friday, a quarter of its value a decade ago and roughly where it stood in the mid-1980s, when the Walkman ruled. Sony's market value is now one-ninth that of Samsung Electronics, and just one-thirtieth of Apple's. Even in Japan, where many consumers remain loyal to the brand, some people seem to be giving up on the company. "It's almost game over at Sony," said Yoshiaki Sakito, a former Sony executive has worked for Walt Disney, Bain & Company, Apple and a start-up focused on innovation training. I don't see how Sony's going to bounce back now. WHAT went wrong is a tale of lost opportunities and disastrous infighting. It is also the story of a proud company that was unwilling or unable to adapt to realities of the global marketplace. Sony's gravest mistake was that it failed to ride some of the biggest waves of technological innovation in recent decades: digitalization, a shift toward software and the importance of the Internet. One by one, every sphere where the company competed - from hardware to software to communications to content - was turned topsy-turvy by disruptive new technology and unforeseen rivals. And these changes only highlighted the conflicts and divisions within Sony. With its catalog of music and foundation in electronics, Sony had the tools to create a version of the iPod long before Apple introduced it in 2001. The Sony co-founder, Akio Morita, envisioned as early as the 1980s marrying digital technology with media content for a completely new user experience. It didn't happen. Initially, Sony engineers resisted the power of the company's media divisions. Then Sony wrestled with how to build devices that let consumers download and copy music without undermining music sales or agreements with its artists. The company went its own way: its early digital music players, for instance, used proprietary files and were incompatible with the fast-growing MP3 format. By the time the different divisions had been corralled into cooperating, Sony had lost its foothold in two crucial product categories: televisions and portable music devices. It was late to flat-panel displays, as well as to digital music players like the iPod. After disappointing sales, Sony pulled the plug on its answer to Apple's iTunes, the Sony Connect online store, after just three years. It has not been able to offer up a comprehensive alternative since. Lower-cost manufacturers from South Korea, China and elsewhere, meanwhile, are increasingly undercutting Sony and other high-end electronics makers. As Sony's brand started losing much of its luster, the company found that it had a harder time charging a premium for its products.