Sony TV Restructures To Garner Profits

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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).”


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