TOKYO Global consumer electronics giant Sony Corporation in a major restructuring move to stem losses has initiated negotiations to offload its personal computers business, streamline its television business to focus on high-end products and cut 5,000 jobs to save about $1billion annually.
The job cuts have been earmarked in both the television and PC business and are to be implemented by March 2015.
In a prelude to that the Japanese company, which has forecast a surprise 110billion yen($1.08 billion) loss in the year ending March 2014 as against the previously projected net profit of 30 billion yen, has already initiated talks with investment fund Japan Industrial Partners (JIP), which will set up a separate business for acquiring Sony's PC business operating under Vaio brand.
"Sony and JIP today concluded a memorandum of understanding confirming the parties' intent for Sony to sell to JIP Sony's PC business currently operated under the VAIO brand," Sony said in a statement.
As a part of the business transfer to JIP, Sony will cease planning, design and development of PC products. Manufacturing and sales will also be discontinued after the Spring 2014 lineup to be launched globally. Even after Sony withdraws from the PC market, Sony customers will continue to receive aftercare customer services.
Sony EMCS Corporation employees involved in PC operations are expected to be hired by the new company established by JIP, it said.
As part of its cost optimisation drive, Sony will also reduce its global workforce. "....Sony is anticipating headcount reduction of approximately 5,000 (1,500 in Japan, 3,500 overseas) by the end of FY 2014," it said.
The company expects to take a hit of 70 billion yen in FY 2014 as restructuring expenses.
"Also Sony expects to allocate a further 70 billion yen (approximate) in restructuring charges in the fiscal year ending March 31, 2015, in order to implement these measures, which are expected to result in annual fixed cost reductions of more than 100 billion yen (approximate) starting in the fiscal year ending March 31, 2016," it said.
Sony now anticipates that its target of returning the TV business to profitability will not be achieved within FY13 largely due to unexpected factors such as the slowdown in emerging markets and declining currency rates.
In light of the TV business' continued importance within Sony's overall strategy, Sony will shift its product mix and focus on increasing the proportion of sales from high-end models in FY14.
To help transform this business into a more efficient and dynamic organization, Sony has decided to split out the TV business and operate it as a wholly-owned subsidiary. The targeted timeframe for this transition is July 2014.
Through restructuring measures, Sony has been able to reduce losses from the TV business, which amounted to 147.5 billion yen in the fiscal year ended March 31, 2012 (FY11), to 69.6 billion yen in FY12. It now anticipates being able to be reduce it further, to approximately 25 billion yen in FY13 and return the business to profitability during FY14.
In terms of electronics sales companies, Sony plans to identify focused product categories for each specific country and region, rationalize support functions, and proactively implement outsourcing and other efficiency measures with the objective of achieving total cost reductions of approximately 20% by the fiscal year ending March 31, 2016 ("FY15").
Sony Chief Executive Kazuo Hirai told reporters the company's electronics business was gradually improving, but restructuring costs would send the company into losses for the fiscal year.
He pointed to cloud-based gaming and TV services, a way of projecting images directly on walls for entertainment and other "Sony-like products," designed to not only deliver on basic gadgetry but also "woo people's emotions." In such network services, Sony faces tough competition from Apple, Google Inc. and other companies.
"We are beginning to see the path to a turnaround in our TV business," Hirai said. "TV remains an important category for Sony."
Sony posted a 27 billion yen ($266 million) profit for the fiscal third quarter, helped by improved sales, especially of its smartphones, and the launch of the PlayStation 4 video-game console, in addition to the favorable exchange rate.
Sony's PlayStation 4 game console, which sold more than 4.2 million units in the first six weeks after its November release, is outpacing competing machines from Microsoft and Nintendo Co.
According to analysts Sony's decision to sell its PC business is reasonable.
"The global PC market is dropping at the moment and when it comes to Sony, its worldwide PC market is small. Also the PC industry is moving towards consolidation with a few large players like Lenovo," Gartner Research Director Tracy Tsai told news agency PTI.
Sony has said it wants to concentrate on mobiles, gaming and imaging and the step to move away from the PC business seems reasonable, she added.