Sony lays out plans to restructure, slash costs and return to profit

Sony chief executive Kazuo Hirai has pledged to make televisions profitable this year. File photo: Bloomberg

Sony chief executive Kazuo Hirai has pledged to make televisions profitable this year. File photo: Bloomberg

Published May 23, 2014

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Tokyo - Sony will cut costs by at least 20 percent in its electronics sales unit and start a new television business as chief executive Kazuo Hirai tries to revive a company that has lost more than $9 billion (R93.5bn) in the past six years.

The company was targeting ¥400bn (R41bn) in operating profit by the end of March 2016, Sony said yesterday. It would seek to reduce costs at its movie unit by $300 million over the same period, and Hirai pledged to make televisions profitable this financial year.

Sony unexpectedly forecast a ¥50bn net loss this year as slumping demand for its televisions and video cameras is compounded by the costs of restructuring and exiting the personal computer (PC) business. That is another setback for Hirai’s plans to turn around the Japanese technology icon through PlayStation consoles, Xperia smartphones and cost cuts as customers flock to devices from Apple and Samsung Electronics.

“Unless Sony can make a popular product like Apple’s iPhone, it needs to improve each division,” Kelvin Ho, a Hong Kong-based analyst at Fitch Ratings, said before the briefing. “A turnaround would be their first step. The next step is to find another leg to improve profitability.”

Sony said it expected to complete its withdrawal from the PC business, the splitting of its television business and reforms in the sales units and at headquarters this financial year.

The company rose 1.9 percent to ¥1 645 in Tokyo before the announcement, narrowing the decline this year to 9.9 percent, in line with the 10 percent decline in the benchmark Topix index.

Sony has revised earnings downward three times in the past year, casting further doubt on Hirai’s ability to execute a turnaround. Since 2009, the company has posted losses of more than ¥941bn, data show. The company said the television business had now lost more than ¥790bn over the past 10 years.

When Hirai took over as chief executive in 2012, he said Sony’s revival would be driven by games, imaging products and mobile devices. Since then, the company has announced job cuts and a restructuring to make television manufacturing a separate unit.

“The biggest issue Hirai should address is creativity,” Damian Thong, a Tokyo-based analyst at Macquarie Group, said.

“How to make attractive, differentiated products, and how to make the company creative again. You have to choose one or two areas to focus on.”

Sony forecast ¥135bn of expenses this year for restructuring and from exiting the PC business.

In November last year, Sony announced plans to cut $250m in costs at its entertainment units over two years in an effort to boost profit and keep full ownership of the movie, television and music businesses.

The company has announced 706 job cuts in California this year, including 216 at Sony Pictures Entertainment that are scheduled to be completed by next month, and 450 at Sony Electronics, according to the state Employment Development Department.

Another 40 positions were lost at Sony Computer Entertainment America. – Bloomberg

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