DeadmeatGA
Banned
Job cuts launch Sony overhaul
By Yuri Kageyama
Associated Press
Web Posted : 10/29/2003 12:00 AM
TOKYO — Sony Corp., its consumer electronics sheen dulled by cheaper competition, is struggling to bounce back with a corporate retooling that will slash 20,000 jobs, or about 13 percent of its global work force.
Sony said the job cuts will occur over the next three years and include 7,000 workers in Japan. It gave no further regional breakdowns or other details. Sony employs some 161,100 people worldwide.
The company's plan is to trim costs while trying to exploit Sony's traditional strengths in entertainment, electronics and video games — particularly with new networked and wireless consumer devices.
"It may appear as though Sony is being sucked into a black hole," Sony executive Ken Kutaragi said, showing a slide with a black dot in the middle of a sky with images depicting Sony's electronics, game and entertainment sectors. "But we hope to create a 'Big Bang' that will lead to new business."
As part of the job cuts, Sony said, it will integrate overlapping administrative and corporate jobs, such as by relocating mainly to the West Coast electronics and marketing operations currently divided between both U.S. coasts. The company has about 22,000 employees in the United States.
Rick Clancy, a spokesman for U.S.-based Sony Electronics Inc., said moving most of Sony's East Coast operations to the West Coast may result in a "few hundred" layoffs but the actual number of cuts remains unclear.
In Europe, the new plan will bring together consumer electronics marketing groups to a new location in Britain.
Sony said it plans to reduce fixed costs to increase its operating profit margin to 10 percent from 4 percent.
Credit Lyonnais Securities analyst Kun Soo Lee said the job cuts were larger than expected and signal that Japanese workers, traditionally accustomed to lifetime employment, aren't going to be protected.
"Sony made it clear that it will trim unnecessary parts of its operations to survive," Lee said.
One element of the new strategy focuses on hardware, including the computer chips, for a networked home in which electronics, video games, music and video merge in products including flat-panel TVs, DVD recorders and home servers.
A key product in this mix is the PSX, a hybrid due out in Japan later this year that combines a DVD recorder, TV tuner and hard drive with the PlayStation2 game console and will start at about $720.
Chief Executive Nobuyuki Idei said Sony had an edge through its ownership of movie, music and video game divisions.
But analysts were less impressed by the new product drive than by the cost-cutting aspects of the new strategy.
"It's a clear and simple plan, and it's easy to understand," said Kazuya Yamamoto, an analyst with UFJ Tsubasa Securities Co. "The question is whether Sony can carry it out. They're just getting started."
How Sony lost its way
Analysis
By Jeremy Scott-Joynt
BBC News Online business reporter
Sony's chief says the company needs to rediscover its fire
That it should come to this.
Sony, perhaps the ultimate in iconic consumer brands and the first Japanese gadget-maker to become a byword for quality rather than price, is up the financial creek.
The first three months of 2003 brought a stunning loss, dubbed by investors the "April Shock" and the trigger for a 25% slide in the company's share price in just two days.
Since then things have been little better, with the figures for July-September showing sales up just 0.4% and profits down 25%.
And now, after much trailing in the Japanese press, comes the solution: a 13% cull in the firm's 155,000-strong global headcount, a deal with South Korean arch-rival Samsung to make flat screens in Korea, plans to ditch the financial services arm, and a tightening of belts across the board.
Flagging
What went wrong at Sony is at least in part open to conjecture.
Details of Sony's 335bn yen restructuring plan
But analysts tend to agree on one thing: Sony, despite its high-stepping past, has been getting a little stale.
While its computers and - in some markets - mobile phones are selling reasonably well (the latter through an initially troubled joint venture with Sweden's Ericsson), the consumer audio-visual market has been more of a struggle.
Even the PlayStation 2, the crowned king of the massive global games console market, has seen sales flag in recent months.
And the entertainment division the company bought from Columbia with such fanfare in the 1980s has recently been notorious for a string of expensive box-office flops such as the Ben Affleck-Jennifer Lopez vehicle Gigli.
Perhaps Sony has even got a little too comfortable, and in the process less fleet-footed about serving up what customers really want rather than what Sony thinks they will buy.
Chief Executive Nobuyuki Idei said as much at a conference earlier this month in Japan.
Sony, he said, was "lacking a sense of urgency".
Rivals
That sense, he said, was what had driven Samsung - one of the biggest thorns in the company's side despite their freshly-minted joint venture - following the Asian currency meltdown in 1997.
Even if you make good sales and innovate - like Sony does all the time - you just don't have that leeway of profit
Seijiro Takeshita, Mizuho International
Samsung is now seeing profits rise comfortably, and its mobile phone and audiovisual lineup is making it one of Sony's key challengers.
The South Korean challenger is a good example of the root of Sony's troubles.
In the decade and a half following its invention of the Walkman - and thus the whole field of personal consumer electronics - the company's brand was a guarantor of quality in a world where that promise was difficult for competitors in the same price bracket to match.
That is no longer true, as has been demonstrated not only by Samsung and fellow South Korean firm LG, but also home-turf competitors such as Matsushita, owner of the Panasonic and Technics brands.
In an unfortunate bit of timing, Matsushita - which has grabbed half the global DVD player market - reported profits for the six months to September up 31.5% to 23bn yen.
Seeking direction
In comparison, Sony's profits for the same period were down 66% to 34bn yen.
"They're playing a losing game," Mizuho International Director Seijiro Takeshita told the BBC, citing the ever-tightening competition.
On cameras, cathode-ray TVs and other audio-visual (AV) products, "even if you make good sales and innovate - like Sony does all the time - you just don't have that leeway of profit."
"The first image you have of Sony is of brand management, particularly in these AV products," he says.
So they need to move further towards software and entertainment products he says - although they need to start getting them right.
But that is no longer enough.
"Until now we were always able to know what Sony would do in five or 10 years' time.
"I'm pretty sure they don't even know now themselves."
Lets talk shit about Archie instead! 