/ 22 September 2005

Sony announces massive job cuts

Sony boss Howard Stringer, under pressure to reverse a slump at the electronics icon, announced 10 000 job cuts on Thursday but renewed his vision of the group as an electronics-to-entertainment colossus.

Sony also issued its second profit warning this year, forecasting a net loss of 10-billion yen ($90-million) in the year to March 2006, largely owing to one-off costs linked to the restructuring drive.

The company will reduce its cost base by 200-billion yen ($1,8-billion) and sell or close 11 of its 65 manufacturing plants, Stringer — Sony’s new British-born chief executive — said as he presented a keenly awaited three-year business-recovery plan.

The plan is seen as the first major test for Welsh-born Stringer, the first foreigner to take the helm at Sony in its six-decade history.

He said the company will focus on three core sectors — electronics, video games and entertainment.

”We need to focus selectively and aggressively to be the number-one consumer electronics entertainment company on the planet,” he told reporters.

He vowed to unite Sony’s warring fiefdoms by breaking down ”silo walls” and eliminating Sony’s ”highly decentralised” structure.

The price of shares in Sony fell by 2,23% to 3 940 yen as investors reacted cautiously to the announcements.

Though it is also known for movies and music, Sony, which brought the world the transistor radio, Walkman and PlayStation, still relies on electronics for 70% of its $67-billion in annual sales.

But it is now lagging behind rivals such as Sharp and Panasonic brand-maker Matsushita in the television market and struggling to challenge Apple’s lead in the market for digital music players.

”To our customers, Sony no longer represents the only alternative,” Stringer acknowledged.

”We do face real competition. Sony and its peers all face tremendous pressure. We have a sense of urgency. We have a sense of purpose. We will compete vigorously as ‘Sony United’,” he said.

Stiff price competition and loss of market share to rivals saw Sony post its first back-to-back quarterly loss in the three months to June and drastically slash its forecast for the year.

Sony’s decision in March to hand management control to Stringer, or ”Sir Howard” as he is known since being knighted by Queen Elizabeth II in 1999, sent ripples through the staid world of Japanese business.

Stringer took the reins at a time when Sony is struggling to end a slump in its electronics products.

The company had already announced in 2003 20 000 job cuts over three years as part of a ”Transformation 60” plan to trim costs and put its media, entertainment and electronics units on the same path ahead of its 60th anniversary in 2006.

Sony’s meteoric rise began almost 60 years ago in Japan’s bombed-out capital when Akio Morita and Masaru Ibuka founded a company to repair damaged radios.

Its first product was a rice cooker. It went on to bring the world myriad other gadgets, becoming a global icon and a symbol of Japan’s post-war technological might. — Sapa-AFP