twice connect
careers

Sony TV Restructures To Garner Profits

11/07/2011 12:01:00 AM Eastern

NEW YORK – Sony Electronics has restructured its
TV business once again, as it tries to turn the operation
around and make a profit.

Lower sales and profitability of its LCD TVs was
cited as one of the reasons for a net loss and lower
sales in its fiscal second quarter and a projected $1.2
billion loss for its fiscal year. (For more details, see the
financial roundup story)

In November 2009, Sony outlined plans to a market
share of 20 million or 40 million unit sales in the fiscal
year ending March 31, 2013, “based on the expectation
that the LCD TV market would continue its high
level of growth,” the company said in a statement last
week.

Under current market conditions Sony is now going
to spend about 50 billion yen to return the TV business
to profitability by March 31, 2014, and transform its
operations to “a 20 million unit structure.”

On Nov. 1, Sony said in a statement it separated its
TV business organizational structure from one business
unit into three.

• The first unit is the “the legacy LCD TV business
area” focused on enhancing products through internal
design and manufacturing.

• The second unit is the third-party original design
and manufacturing (ODM) area that makes products at
a low cost through external design and manufacturing.

• The third unit is developing and designing the
next-generation TV. Upstream processes are also being
strengthened by consolidating the marketing and
product strategy functions.

Sony Electronics in the U.S. did not give any specific
details on how these changes may affect its operations
here. A company spokesman told TWICE,
“We’re committed to bringing the best entertainment
experiences and products to consumers, whether at
home or mobile. As such, television is an important
part in that space and we’re definitely here to stay. As
a business, we continually strive for ways to both improve
the quality of our deliverables and increase the
effectiveness and efficiencies of our organizations.”

Sony will incur additional charges of approximately
50 billion yen to return the TV business to profitability
by March 31, 2014, and transform its operations to “a
20 million unit structure.”

This will primarily be due to impairment charges relating
to machinery and equipment, as well as costs related
to reducing the number of models. Following this
realignment in the TV product category, Sony expects
to record sales of 875 billion yen and an operating loss
of 175 billion yen in fiscal year 2011, once the 50 billion
yen charges have been recorded.

According to a Sony statement, the TV restructuring
includes the reduction of LCD panel costs (about 40
percent of total improvement), and enhancing product
competitiveness and reforming operations to improve
marginal profit (approximately 30 percent of total improvement).

In developed countries, “the restructuring will focus
on improving model mix ... resulting in further profitability
improvement,” Sony said in its statement.

In supply-chain management, new systems are being
introduced with the aim of reducing inventory turnover
by a further 10 days in fiscal year 2012. The restructuring
will also include deploying “unique technology,
such as super-resolution high image quality engines
and accelerate the development of a next-generation
TV,” Sony said. It will also increase the added value
of TV by providing consumers with “an integrated user
experience across multiple devices and network services,
reduce SG&A at sales companies, and improve
R&D and indirect costs (approximately 30 percent of
total improvement).”

Want to read more stories like this?
Get our Free Newsletter Here!