TechWeb

Sony To Cut 20,000 Jobs Over Three Years

Oct 28, 2003 (07:10 AM EST)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=15600818


TOKYO (AP) -- Sony Corp. is slashing 20,000 jobs, or about 13 percent of its global work force, in the next three years to cut costs as part of a turnaround strategy aimed at reviving the huge electronics and entertainment company's lagging profits.

Sony said Tuesday the turnaround plan would boost efficiency and better integrate its entertainment, video-game, and consumer electronics businesses.

Sony said 7,000 of the job cuts will be in Japan, but gave no further regional breakdowns or other details. Sony employs about 154,500 people worldwide.

It plans to integrate overlapping administrative and corporate jobs to increase efficiency, such as by relocating U.S. electronics and marketing operations divided between the West and East Coasts mainly to the West Coast. In Europe, it will bring together consumer electronics marketing groups to a new location in Britain.

One Sony executive suggested the plan was designed as a "Big Bang" catalyst for new business.

Sony has been reviewing its strategy as cheaper rivals such as Korea's Samsung and Dell Inc. of the United States have chipped away at its profits. Sony's image, built over the decades through hits like the Walkman, has lost some of its shine as high-tech products have become cheap commodities.

Sony also said Tuesday it will set up a $2 billion joint venture with Samsung Electronics Co. of South Korea to develop liquid crystal display panels. A final agreement is expected by early next year, the companies said.

Analysts said the cuts were a positive move but cautioned that Sony needs to show in action it can become more profitable.

"It's a clear and simple plan, and it's easy to understand," said Kazuya Yamamoto, analyst with UFJ Tsubasa Securities Co. in Tokyo. "The question is whether Sony can carry it out. They're just getting started."

The plan includes bringing together engineers in the company's home and mobile electronics sectors, such as cell phones, TVs, and video-game consoles, to beef up development of computer chips and devices, Sony said.

Speaking to reporters at a Tokyo hotel, Sony officials said they were presenting a two-stage plan to cut costs and get growth going.

"It may appear as though Sony is being sucked into a black hole," Sony executive deputy president Ken Kutaragi said, showing a slide that had 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."

Kutaragi said Sony will focus on key products such as flat TVs, DVD recorders, home computer servers, and the PSX, the gadget Sony is billing as a crossover between audiovisual equipment and the PlayStation 2 video-game console.

As part of cost cuts that will save the company $2.8 billion a year, Sony will trim production, distribution, and service facilities by about 30 percent and stop Japanese production of cathode ray tubes for TVs by the end of this year, said Sony president Kunitake Ando.

By April next year, a holding company will be set up for Sony's three financial businesses--Sony Life Insurance Co., Sony Assurance and Sony Bank--Sony chief executive Nobuyuki Idei said.

Sony has even fallen behind domestic rivals such as Sharp Corp. in increasingly popular liquid crystal display TVs and Matsushita Electric Industrial Co., which makes the Panasonic brand, in DVD recorders.

Sony's profits tumbled 25 percent in the July-September quarter to $304 million compared to a year ago. Sales edged up 0.4 percent to $17 billion--the first sales increase in three quarters.

On Tuesday, electronics rival Matsushita reported its that profits grew 73 percent in the same quarter on a 3 percent rise in sales.

On Monday, Sony announced a joint venture starting January with Japan's top mobile carrier, NTT DoCoMo, to develop an integrated computer chip based on Sony's "smart card" technology to allow cell phones to be used as train passes and for buying goods, but it is not expected to generate profits for the first few years.

In response to a reporter's question about whether he was considering quitting because of Sony's poor showing, Idei said: "Our results show recovery." He then broke into a grin: "I don't understand your question."

Sony shares closed up 1 percent at $36 on the Tokyo Stock Exchange Tuesday, before the plans were announced.