|Sony Cuts 10,000 Jobs, Hirai Attempts Turnaround, Thursday, 12 Apr 2012|
(Bloomberg) Sony Corp. (6758) will cut 10,000 jobs, or about 6 percent of its workforce, two days after reporting a record loss as new Chief Executive Officer Kazuo Hirai implements the company's biggest labor reduction in three years. Sony will take a one-time charge of 75 billion yen ($926 million) as restructuring costs in the year ending March 2013, the company said in a statement to the Tokyo Stock Exchange today. Japan's biggest consumer-electronics exporter will reduce costs at its TV operations, slash the number of models and consider an alliance on batteries for electric cars, it said.
The plan comes after Sony lost 919 billion yen in the past four years as the company that set the trend in 1980s with gadgets like the Walkman lost customers to Samsung Electronics Co. and Apple Inc. Hirai, who took the top job this month after earning a reputation for turning around the PlayStation game business, has vowed "painful" cost cuts and put himself in charge of the bleeding TV unit as part of the overhaul. "We cannot avoid facing painful decisions, but if we are scared of pains we cannot change Sony," said Hirai, who took over this month. "My biggest responsibility is to revive the electronics business and shift it into a path for growth."
The maker of Vaio computers and PlayStation game consoles is targeting an operating profit margin of 5 percent or more by the fiscal year beginning April 2014, the company said as part of Hirai's plan. The world's third-largest TV maker reiterated its attempt to make the unit profitable next fiscal year. The business hasn't earned a profit for the past eight years. The company wants to reduce fixed costs at the operation by 60 percent.
Sony rose 0.9 percent to close at 1,528 yen in Tokyo today, before the announcement. That extended its gain this year to 11 percent after slumping 53 percent in 2011. Sony, worth more than $120 billion in 2000, is now valued at $19 billion, compared with $584 billion for Cupertino, California-based Apple and $164 billion for Samsung.
The job cuts announced today will be done by reorganizing businesses and restructuring the headquarters, marketing units and other affiliates, Hirai said without elaboration. "Sony really needs to start boosting sales by tapping surging demand for smartphones and tablet computers or show another convincing plan to boost its competitiveness," Takashi Watanabe, a Tokyo-based analyst for Goldman Sachs Group Inc. who rates the stock sell, said before the announcement. "The company may end up carrying out restructuring every year." Sony has cut 66,500 jobs since 1999, according to Keita Sanekata, a spokesman for the company, which had 168,200 employees as of March 2011, according to data compiled by Bloomberg.
In 2005, Hirai's predecessor, Howard Stringer, said the company would eliminate 10,000 jobs and shut 11 factories after predicting its first annual loss in more than a decade. After the 2008 financial crisis, Sony cut 19,500 jobs in the year to September 2009. Earlier this week, Sony said it posted a record 520 billion-yen loss in the year ended March 31 after taking a charge to write down deferred tax assets. The preliminary loss was more than double the Tokyo-based company's forecast in February. The fourth consecutive annual loss for Sony is a first for the company since it was listed in 1958. The company also said it wants to have 8.5 trillion yen in revenue and a 10 percent return on equity for the year ending March 2015. Sony has also set a target of 6 trillion yen in revenue from electronics and 1.5 trillion yen in revenue from imaging products by then.
Sony may sell less competitive businesses, Hirai said two months ago as he appointed Tadashi Saito chief strategy officer to assist Hirai on decisions such as acquisitions. Last month, Sony agreed to sell Sony Chemical & Information Device Corp. to the Development Bank of Japan. The two companies aim to reach a formal agreement in May and complete the sale this year, they said March 22, without specifying the value of the deal. The company may raise capital through asset sales and a share offering, Chief Financial Officer Masaru Kato said earlier this week. Sony doesn't have a specific plan yet, he said. Sony's ratio of shareholders equity to total liability and equity dropped for a fourth consecutive quarter to 20.7 percent as of Dec. 31, compared with 65 percent for Samsung and 34 percent for Panasonic, according to data compiled by Bloomberg.
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