In an effort to revitalize its struggling businesses, Sony plans to invest $3.1 billion in restructuring over the next three years.
As a major step toward turning around the company, Sony said it would eliminate 20,000 jobs in the coming three years, or about 13 percent of its global workforce. Some 7,000 of these layoffs are set for Japan, while numbers for the United States were not made available.
The Sony reform plan, called Transformation 60, calls for better integration of product sectors — such as cellphones and mobile devices, televisions and video game consoles — as a means to stimulate the company’s computer chip business. Sony is aiming to reach an operating profit margin of 10 percent, up from 4 percent, and to reduce annual fixed costs by $3 billion by 2006.
Along with details of its restructuring, Sony reported it has agreed to a $2 billion joint venture with Samsung Electronics to make liquid crystal display (LCD) flat-screen televisions. The 50-50 partnership, set for a first quarter 2004 closing, calls for a new manufacturing plant in South Korea, which would be building LCD panels by 2005.
At this time, Sony depends on outside manufacturers for LCD panels for its flat-screen TVs. The ramp-up of LCD production, in turn, should reflect on Sony reducing its dependence on making bulky, traditional TV tubes, with production in Japan ending this year.
As part of the Sony restructuring, vice chairman Howard Stringer has been named Sony Group Americas representative, chief operating officer in charge of the Entertainment Business Group and chairman/CEO of Sony Corp. of America.
Executive deputy president Shizuo Takashino has been named chief operating officer in charge of IT and Mobile Solutions Network Co. He also has been named chairman of Sony EMCS Corp.
Executive deputy president Ken Kutaragi has been named chief operating officer in charge of the Home Network Co., Game Business Group and Broadband Network Co. He also has been named NC president for the Semiconductor Solutions Network Co. and president/CEO of Sony Computer Entertainment.
Sony, which has seen its overall profit and sales erode in the past year, announced earlier this month a 25 percent earnings decline for its fiscal second quarter, ended in September. Overall sales edged up less than 1 percent in the second three months, the first increase in the past three-quarters.
Sales of consumer electronics, however, did show signs of returning to health in the second quarter, with operating income rising over 36 percent. CE sales for the period dropped 1.4 percent, as reported. The company said it is dedicating about $3 billion solely for the resurgence of its electronics business, which accounts for about 65 percent of overall revenue.
Sony’s restructuring is expected to focus on such key product categories as flat TVs, DVD recorders, home servers and the PSX, which is heralded as a bridge between the PlayStation2 game console and A/V equipment. Sony said growth must rely on differentiation of digital CE products from unique company components.
Sony’s integration effort includes the combining of its U.S. consumer marketing operation on the West Coast next year, announced earlier. Across the company, it is expected Sony can save about $2.8 billion annually, by trimming production, distribution and service facilities about 30 percent.
Slowing sales and earnings in Sony’s game and film segments have contributed dramatically toward an overall earnings decline. The gaming business, alone, saw a 91 percent slide in operating profit and 35.6 percent drop in sales in the second quarter, as reported.
