September 12, 2005 12:36 PM PDT

Sony to announce makeover plans

Sony said on Monday that it will hold a meeting on Sept. 22 to talk about a restructuring plan designed to get the company back to profitability.

CEO Howard Stringer, president Ryoji Chubachi and chief financial officer Nobuyuki Oneda are scheduled to talk at the company's strategic meeting in Tokyo.

Howard Stringer
Howard Stringer
CEO, Sony

The meeting is expected to include announcements about aspects of the plan, internally dubbed "Project Nippon," including shifts in personnel and resources around Sony Corp. and Sony Computer Entertainment (together referred to as Sony Group). The company is also expected to announce new ways of converging its entertainment, electronics and network businesses.

Back in June, Stringer suggested to investors that Sony would look to narrow its product lineup or withdraw from research-and-development projects and struggling businesses, but he stopped short of revealing plan specifics.

Sony's current restructuring initiative, called "Transformation 60," has already slashed about 20,000 jobs, most of those in Sony's loss-making electronics division. The three-year plan is expected to wrap up at the end of March 2006.

One project not expected to see cost reductions in the near future is Sony's multi-billion investment in the Cell microprocessor, which Sony co-developed with IBM and Toshiba.

Stephen Baker, an analyst at NPD Group, said some of Sony's biggest problem areas--products such TVs--are also categories on which the company needs to remain focused. And some of the low-visibility categories--including portable music players (excluding the MP3 players), clock radios and car stereos--include products on which Sony should be making money, milking each category as the market for it gets smaller.

What's left over are the midtier categories, ones in which Sony has a history and has a large but not dominant share. Logical cuts could be made in a few of these categories, Baker noted.

"It is hard to imagine an all-encompassing Sony brand not participating in the DVD market, home audio and speakers, digital cameras, digital camcorders or even PCs," Baker said.

Baker suggests that Sony take a good, hard look at diminshing its efforts on current DVD technologies and focus instead on future DVD technologies such those that will use the Blu-ray recording standard. He also said the company should take its desktop PCs out of the hands of retailers and adopt a direct-sales model like the one used by Dell.

Sony also would do well to focus on getting products out first instead of selling the most, Baker suggests.

"Do the cool and cutting-edge, and then get out when the market turns commodity," he said.

Sony posted an operating loss for its first quarter, mainly due to huge amounts of red ink in its television division, and slashed its full-year group operating profit outlook by 81 percent to 30 billion yen, or $274 million. Sony stock pushed upward 11 percent in midday trading on Monday, selling for more than $36 per share.

Reuters contributed to this report.

 

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