Sony reports $1B annual loss, first in 14 years - An Analysis on Yahoo

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Stringer Sticks Knife Deeper Into Sony

Tim Kelly, 05.14.09, 03:47 AM EDT

As losses at Sony mount, CEO Howard Stringer is using the crisis to slash costs further.

TOKYO -- His management grip tightening on Sony, CEO Howard Stringer is cutting deeper into the consumer electronic giant's costs in a bid to stem losses. He will shake a further $500 million in expenses from the PlayStation game consoles maker -- on top of $2.5 billion already announced -- by closing down eight factories worldwide, adding to planned layoffs of 16,000 workers.

Sony ( SNE - news - people ) Thursday said it lost $1 billion dollars in the year ended March 31, and expects to lose another $1.2 billion this fiscal year as consumers worldwide cut far back on spending due to the recession, hurting sales of Sony televisions and cameras. Sales of Cybershot digital cameras this business term will fall by 2 million units to 20 million, according to Sony, which also expects to sell nearly one million fewer Handycam video cameras.

The harsh downturn for Sony has given Stringer the impetus he sought to cut deeper into the Japanese company. The Welsh-born executive has become more aggressive as the worst global recession in 80 years saps profits. Sony's greatest weakness, argues Stringer, is the inability of its business units, which he dubs "silos," to work together.

The iPod shock first highlighted the Japanese company's internal communication handicap. Apple's integration of hardware and software in a hit music player winded the creator of the Walkman and almost overnight destroyed its lead in portable music players. The more recent success of Nintendo's simple and easy-to-use Wii videogame console - which sapped sales of Sony's Playstation -- was a second painful reminder that Sony was losing the plot.

Stringer's silo-busting strategy relies on two new business groups. One ties together the sprawling corporation's personal computer business, mobile gadgets and Sony Computer Entertainment. The other combines televisions, digital imaging, home audio and video. Stringer also appointed a company-wide software and technology czar, Keiichiro Shimada, and a logistics and procurement group chief, Yutaka Nakagawa, in an attempt to smash Sony's bunker mentality.

Announcing the changes in February, Stringer, who flits between Tokyo and New York, added president to his job description, removing veteran Sony executive Ryoji Obuchi from the post. That management tweak gives him direct control of Sony's core electronics business, a move that investors applauded. Since then, Sony's shares have gained 43% double the gain in the benchmark Nikkei 225 index over the same period.

With the profit crisis at Sony far from over, for the time being at least, it looks like Stringer gets to wield his knife at will.

http://www.forbes.com/2009/05/14/sony-stringer-nintendo-markets-equities-loss.html