September 22, 2005 4:57 AM PDT
Sony plans broad reorg, 10,000 job cuts
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The company known for its Walkman music player, the "Spider-Man" movie franchise and the PlayStation game console will "eliminate the corporate silos" of its Sony Corporation Network starting Oct. 1 and replace it with a new structure that it hopes will allow for better coordination on product planning. Centralized decision-making authority over key areas will go to president and electronics CEO Ryoji Chubachi.
The company, which has been facing financial losses and pressure from Samsung's LCD and plasma televisions and Apple Computer's iPod, said it expects to spend $1.8 billion on the restructuring. The company will be refocusing its efforts on electronics, televisions, digital imaging, DVD recorders and portable audio.
Because of the changes, Sony will report a financial loss of about $90 million on sales of about $65.1 billion for the year, the company said. Sony previously said it would post a profit of $90 million.
Chief executive Howard Stringer, Chubachi and chief financial officer Nobuyuki Oneda outlined the details of the changes during a meeting with management and key partners in Tokyo. Stringer admitted past missteps by the struggling electronics group but pledged a change.
"We have made promises before, but we failed to execute them," Stringer said at an afternoon news conference in Tokyo. "We must fight like the Sony warriors that we are."
Faced with financial losses and pressure from Samsung's LCD and plasma televisions and Apple Computer's iPod, Sony is streamlining its businesses into five groups that will focus more on electronics, televisions, digital imaging, DVD recorders and portable audio.
CEO Howard Stringer is throwing out Sony's traditional corporate structure in favor of one that, it's hoped, will allow for better coordination on product planning.
The job losses had been expected. Sony, the world's second-largest consumer electronics maker, said earlier this month that it would unveil a new strategy to reallocate resources, suggesting it would look to trim its product lineup or downsize poorly performing businesses.
The 10,000 positions to be eliminated represent about 7 percent of Sony's global work force. The company said it will slash 4,000 jobs in Japan and 6,000 jobs elsewhere by 2008.
Sony said its new structure will include five business groups, two units and one division. In addition, two development groups are being established as part of the restructuring.
The five business groups will focus on TV, video, digital imaging, audio, and what Sony calls "B&P"--broadcast and professional products.
Television is of the utmost importance to Sony, as it hopes for a turnaround by the second half of fiscal year 2006. The company has shelved its production of cathode ray tube, or CRT, television sets and will now focus on selling LCD and rear-projection TVs.
Rivals such as Samsung, Panasonic owner Matsushita Electric and Sharp will keep the division on its toes, but executives said the group will be profitable by rethinking its manufacturing sites, increasing the number of Sony-made components and putting its engineering functions under one roof.
The company's two business units will include its Core Component Business Unit, which oversees its production of its flash-based memory sticks, and its Semiconductor Business Unit, which includes its Cell microprocessor, which Sony co-developed with IBM and Toshiba.
Responsibility for Sony's PC and laptop computer Vaio line will remain with Yoshihisa Ishida, the head of Sony's lone corporate division.
As for research and development, Sony said it will split the work between its Technology Development Group and its Display Device Development Group. One focus will be improvement to Sony's self-luminous flat-panel OLED (organic light-emitting diode) displays, which have been in production for a year.
In looking at its prime opportunities for growth, Sony said it will focus on high-definition technologies, devices related to Blu-ray, mobile products and devices that can control a wide range of home electronics products. The company said it will also bolster its software development, including its middleware, applications, codec and digital rights management technology.
Sony also said that its Communication Network is still on track for an IPO for this fiscal year but that a previously disclosed IPO plan for its financial services division has been postponed until fiscal year 2007 or later.
Sony has already slashed about 20,000 jobs in recent years, most of those in Sony's loss-making electronics division, as part of a restructuring initiative, called "Transformation 60." That three-year plan is expected to wrap up at the end of March 2006.
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