Sony to Cut 10,000 Jobs as New CEO Hirai Attempts Turnaround
Sony Corp. (6758) will cut 10,000 jobs, or about 6 percent of its workforce, two days after reporting a record loss as new Chief Executive Officer Kazuo Hirai implements the company’s biggest labor reduction in three years.
Sony will take a one-time charge of 75 billion yen ($926 million) as restructuring costs in the year ending March 2013, the company said in a statement today. Japan’s biggest consumer- electronics exporter plans to raise operating-profit margin, cut costs at its TV operations, reduce the number of TV models, and consider an alliance on batteries for electric cars, it said.
“I still can’t see anything positive in this plan,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. “I’m not convinced the company has a logical plan to achieve its goal of raising the operating profit margin.”
Sony wants to “revitalize and grow” its electronics business under Hirai’s new management plan, according to the statement. The initiatives include bolstering the digital imaging, games and mobile businesses; turning around the TV division; expanding in emerging markets; creating new businesses and accelerating innovation; and realigning the business portfolio.
“We cannot avoid facing painful decisions, but if we are scared of pains we cannot change Sony,” said Hirai, 51, who took over this month. “My biggest responsibility is to revive the electronics business and shift it into a path for growth.”
Sony rose 0.9 percent to close at 1,528 yen in Tokyo today, before the announcement. That extended its gain this year to 11 percent after slumping 53 percent in 2011. Sony, worth more than $120 billion in 2000, is now valued at $19 billion, compared with $584 billion for Cupertino, California-based Apple and $164 billion for Samsung.
The maker of Vaio computers and PlayStation game consoles is targeting an operating profit margin of 5 percent or more, return on equity of 10 percent and sales of 8.5 trillion yen in the fiscal year ending March 2015, the company said. Sony also has a target of 6 trillion yen in revenue from electronics and 1.5 trillion yen in revenue from imaging products by then.
The world’s third-largest TV maker reiterated its attempt to make the unit profitable next fiscal year. The business hasn’t earned a profit for the past eight years. The company wants to reduce fixed costs at the operation by 60 percent.
The job cuts announced today will include employees expected to be transferred outside of the group as part of the sale of businesses and other realignments, Sony said.
“Sony really needs to start boosting sales by tapping surging demand for smartphones and tablet computers or show another convincing plan to boost its competitiveness,” Takashi Watanabe, a Tokyo-based analyst for Goldman Sachs Group Inc., said before the announcement. “The company may end up carrying out restructuring every year.”
The Tokyo-based company has cut 66,500 jobs in four restructuring plans since 1999, according to Keita Sanekata, a spokesman for the company. It had 168,200 employees as of March 2011, according to data compiled by Bloomberg.
In 2005, Hirai’s predecessor, Howard Stringer, said the company would eliminate 10,000 jobs and shut 11 factories after predicting its first annual loss in more than a decade. After the 2008 financial crisis, Sony cut 19,500 jobs in the year to September 2009.
Earlier this week, Sony said it posted a record 520 billion-yen loss in the year ended March 31 after taking a charge to write down deferred tax assets. The preliminary loss was more than double the Tokyo-based company’s forecast in February.
The fourth consecutive annual loss for Sony is a first for the company since it was listed in 1958.
Sony will consider selling or forming alliances in businesses that are losing money, have small room for growth or have little synergy with its core electronics operation, Hirai said today. Two months ago, Hirai appointed Tadashi Saito chief strategy officer to assist him on decisions such as acquisitions.
Last month, Sony agreed to sell Sony Chemical & Information Device Corp. to the Development Bank of Japan. The two companies plan to reach a formal agreement in May and complete the sale this year, they said March 22 without specifying the value of the deal.
The company may raise capital through asset sales and a share offering, Chief Financial Officer Masaru Kato said earlier this week. Sony doesn’t have a specific plan yet, he said.
Sony’s ratio of shareholders equity to total liability and equity dropped for a fourth consecutive quarter to 21 percent as of Dec. 31, compared with 65 percent for Samsung and 34 percent for Panasonic, according to data compiled by Bloomberg.
Hirai is bringing in his own management to turn around the company. He appointed Hiroshi Yoshioka, executive deputy president, as head of the medical business and Tadashi Saito as chief strategy officer.
Shoji Nemoto was appointed executive vice president to oversee Sony’s technology strategy. Nemoto is also head of professional solutions, imaging products and corporate research and development.
Born in Tokyo on Dec. 22, 1960, Hirai joined Sony’s music venture fresh from college in 1984. He edged out three other candidates with engineering backgrounds for the top job.