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UPDATED: Sony is set to slash 10,000 jobs and up to 20% of their current products to help end losses Chief Executive Officer Howard Stringer has said. The cuts will be made worldwide including Australia.
Sony will reduce its Japanese workforce by 4,000 people and by 6,000 overseas, the company said in a statement today. According to Sony Australia Corporate Affairs spokspeson Jenny Geddes “we also had to wait till the announcements were made in Japan” Shortly after the announcement Geddes said” Local management are still digesting the changes”.
Sony Corp. will eliminate 10,000 jobs and forecast its first loss in more than a decade after competitors such as Apple Computer and Sharp took the lead in music players and televisions. The company’s shares slid.
The world’s second-largest consumer electronics maker aims to trim its workforce by 6.6 percent by March 2008 and shut 11 factories, Chief Executive Officer Howard Stringer said at a press conference in Tokyo today. He predicted a 10 billion yen ($90 million) annual loss, reversing a July profit forecast.
Stringer’s job-cut program is half the size of predecessor Nobuyuki Idei’s three-year plan announced in 2003, which failed to prevent the company’s electronics business from suffering two years of losses. The plan may not be enough to revive earnings growth, said investor Pascal Masse.
Cost cuts are one thing, having good products is another,'' said Masse, who helps manage $12 billion of Asian equities at Aberdeen Management Asia Ltd. in Singapore commented in an e-mail after the announcement. He does not hold Sony shares.If there are no killer products to come out of the pipeline, this won’t make much of a difference.”
The 59-year-old company that invented the Walkman music player is narrowing its focus to electronics, games and movies, after diversifying into businesses ranging from insurance to robots in the past two decades. Sony plans to invest more in mobile devices, chips and TVs after companies including Samsung Electronics Co. spent more on product development.
Shares of Sony in Frankfurt traded at 28.34 euro, or 3,844 yen, 2.4 percent lower than the Tokyo close of 3,940 yen. Japanese stock markets are shut for a holiday tomorrow.
Cost Cuts
There will be a strong wave of sell offers,'' said Shigemi Nonaka, who manages the equivalent of $126 million, including Sony's shares, as Tokyo-based chairman of Polestar Investment Management Co.The changes won’t generate new revenue.”
Sony expects to trim 200 billion yen of costs through the three-year restructuring plan, and sell 120 billion yen of assets including real estate, said Stringer, who started as CEO in June. The company will also lower the number of its product models by 20 percent, and delay the initial public offering of its financial unit until at least April 2007.
Sony will cut about 4,000 jobs in Japan and 6,000 overseas, and reduce the number of factories worldwide to 54 from 65, without specifying which countries would be affected.
The company expects a 20 billion yen operating loss for the year ending March 2006, lower than its initial forecast of 30 billion yen profit, because of the restructuring costs.
Sony spent 356.8 billion yen last fiscal year on capital investment, less than half of Samsung’s 7.67 trillion won ($7.5 billion) expenditure in 2004.
Cell Chip
Sony, which will invest 340 billion yen on its chip business in the next two years, will also create a new division for its Cell chip, a high-speed processor being developed with International Business Machines Corp. and Toshiba Corp. The business will report directly to Stringer.
We need to focus on selected products to remain as a leading company in the consumer electronics industry,'' he said. The Cell willbe used across games, electronics and IT products.”
President Ryoji Chubachi will also oversee a group that will develop OLED screens, or organic light-emitting diodes, which are brighter than other flat-panel screens and use less electricity.
Stringer and Chubachi have labeled 15 unprofitable products that they may cut, declining to give details. Chubachi did say that Sony will reduce its research and development at its robot business, and are not developing new models in its high-end Qualia electronics brand.
Profit Margin
The company expects an operating profit margin of 5 percent by March 2008. The margin at the end of March 2005 was 1.6 percent, compared with 3.5 percent for Matsushita, 6 percent at Sharp Corp. and 14 percent for Samsung in their latest respective fiscal years.
For its electronics business, Sony expects an operating profit margin of 4 percent and will eliminate some business divisions.
Sony was late in adopting LCD TV technology and bringing out flat-panel models, and has seen its market share erode in the television industry by Sharp and Matsushita Electric Industrial Co., which are the world’s biggest maker of LCD televisions and plasma display televisions respectively.
The lack of its own panel-making facilities pushed up costs and made timing difficult for product releases. The company in 2004 hooked up with Suwon, South Korea-based Samsung and formed a $2 billion venture to make LCD panels and began shipments in April.
The company in the past month has also begun phasing out its eight-year-old Wega brand flat-panel televisions and replaced it with the Bravia name, to give it a new look and revive the business. Sony today said it plans to make 75 percent of its electronics products capable of using high-definition technology by March 2008, compared with 35 percent now.
`Hollow’
Idei, who took office in June 1999, saw Sony’s stock price triple to a record 16,300 yen in March 2000, only to watch it lose almost three-fourths of its value and be overtaken by Samsung and Matsushita in terms of market value. Idei fell short of his targets to increase Sony’s operating profit margin to 10 percent and slash 20,000 jobs by Sony’s 60th anniversary next year.
Restructuring is the first step and that's the easy part, but what they don't have yet is a viable business model,'' said Carlos Dimas, an analyst at CLSA Asia Pacific Markets, who spoke before the announcement.The market won’t accept hollow promises.”
For offical Sony statement see:
