Sony Corp. announced Thursday it will slash 10,000 employees, or about 7 percent of its global workforce, and close 11 production facilities as part of a sweeping restructuring plan in a bid to revive its fortunes.
The plan is aimed at cutting costs by 200 billion yen by the end of March 2008, Sony said.
CEO Howard Stringer said the company will focus its resources on “champion products,” including the PlayStation, LCD TVs, Walkmans and camcorders, and withdraw from 15 business categories, which he declined to name.
He said the company will overhaul its “fragmented silo organizational structure,” which has impeded effective communications and operations.
“We must be like the Russians defending Moscow against Napoleon, ready to scorch earth, to stay ahead of the invaders,” he told a new conference. “We must be Sony united and fight like Sony warriors.”
Thursday’s announcement was watched closely as it is the first test for Stringer, who assumed the top position in June, to attempt to turn around the consumer electronics giant, which has grown quite unwieldy in the rapidly changing digital era.
Stringer said Sony will continue to pursue growth in its consumer electronics and entertainment segment, noting electronics, games and entertainment are its core trio.
Sony denied an earlier media report that it plans to sell off its financial unit, saying it is not even included as a candidate for divestment.
Under the plan, the company will spend 210 billion yen to carry out the groupwide restructuring until the end of fiscal 2007.
Of the workforce reduction, 4,000 employees will be cut from the domestic workforce.
Half of the 10,000 cuts overall will be done at headquarters and administrative divisions in other sectors.
Stringer said revitalizing the electronics business was the firm’s priority. Sony has been slow to ride the digital wave.
Dragged down by its TV unit, Sony’s consumer-electronics business posted losses for two straight years, with management expecting another loss for the current fiscal year.
President Ryoji Chubachi, who heads the consumer-electronics division, said Sony’s fragmented organization has resulted in stretched out resources and redundant products. He said the firm will reorganize and have a centralized chain of command.
Under the plan, Sony will reduce the number of products by 20 percent.
While Chubachi did not name which categories would be scrapped, he said Sony’s robot business — known for the Aibo and Qrio units — would be scaled down and it would stop new product releases for its high-end Qualia brand.
Analysts gave mixed views to Sony’s plan.
“I see positively what (Sony) is trying to do,” Kazuharu Miura, an analyst at Daiwa Research of Institute Ltd. “But I am not sure whether it can actually deliver.”
In October 2003, then-CEO Nobuyuki Idei announced a restructuring plan that included 21,000 job cuts. It failed to turn the firm around.
Miura said the firm made the right decision to focus on TV in its audiovisual business. He also welcomed the company’s efforts to break down the walls between its business units and to create synergy.
Fumio Osanai, a UBS Securities analyst, meanwhile, said he was unimpressed with the restructuring plan, noting the job cuts are not drastic enough. “They should slash at least 10 percent of the total workforce.”
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.