Sony is restructuring again. This time it may mean business.
The Japanese electronics and entertainment giant, which predicted Thursday that it would lose 110 billion yen, or about $1.1 billion, in its current fiscal year, said it would sell its unprofitable personal-computer unit. It also announced plans to turn its equally troubled television-manufacturing business into a separate, wholly owned subsidiary. And it said it would cut 5,000 jobs.
The overhaul marks the fourth round of large-scale job cuts over the past decade. Sony announced 10,000 reductions in 2005, 8,000 more in 2008 and a further 10,000 two years ago, bringing its head count down to 145,000 as of September.
While previous divestitures have involved peripheral operations in areas like chemicals, now Sony is ridding itself of a brand and a business: Vaio computers, which it once considered central to its ambitions of keeping pace with global technology powers like Apple and Samsung Electronics. And it is positioning itself at arm’s length from television, a sector in which its Trinitron and Bravia TVs once set the standards in picture quality and brand image.
- McMorris Rodgers should ask hometown folks about Obamacare
- Seattle congestion: We're No. 5
- Expedia expected to announce Seattle move
- Seahawks re-sign FB/DL Will Tukuafu
- Seattle traffic congestion: We're No. 5
Most Read Stories
“Sony has had bigger cuts,” said Damian Thong, an analyst at Macquarie Securities. “But these are, in some ways, the most meaningful cuts.”
While Sony’s problems reflect a broader crisis in the Japanese electronics industry, other companies, like Panasonic, have moved more aggressively to restructure. Panasonic, which has been pulling out of certain consumer-electronics markets, like smartphones, and focusing more on behind-the-scenes businesses like batteries for electric cars, this week reported that its quarterly earnings more than tripled.
While some investors and analysts have urged Sony to get out of consumer electronics entirely, the chief executive, Kazuo Hirai, reiterated Thursday that he wanted to rebuild around promising areas like game consoles and smartphones.
Those businesses showed progress in the quarter ended in December. Sony reported a “significant increase in sales of smartphones” as well as a big jump in operating income in its game division because of the introduction of the PS4 console.
Over all, the company reported net income of 27 billion yen, or $267 million, after a loss of 10.8 billion yen a year earlier. Sales rose to 2.41 trillion yen from 1.95 trillion yen, though the main factor was a weaker yen, which increases the value of overseas sales when converted into the Japanese currency.
But investors have gotten used to a dose of bad news after any sign of improvement from Sony, and Thursday brought no exception, with the new estimate of a 110 billion-yen loss for the current fiscal year, which ends in March, after a previous forecast of a profit of 30 billion yen.
While much of the expected loss will come from restructuring costs, Sony also lowered its full-year sales forecast for smartphones to 40 million devices from 42 million.
At a news conference in Tokyo, Hirai described the agreement to sell the PC unit — to the investment fund Japan Industrial Partners — as an “agonizing decision.” Sony said it planned to keep a 5 percent stake in the new PC company to be formed from the sale. Other terms, including the price, remain subject to negotiation, Sony said.
Japan Industrial Partners specializes in buying unwanted assets from Japanese electronics giants, including companies like NEC and Olympus.
Japan Industrial Partners “believes that with its support, the new company that will operate the Vaio-branded PC business will be able to achieve future growth and profitability and meet the expectations of Vaio customers by leveraging the wealth of innovative design expertise and operational know — how accumulated by Sony within the PC business,” the companies said in a statement.
Along with televisions, PCs have been a particular drag on Sony. PC shipments from all makers worldwide fell 10 percent last year, to 316 million, according to Gartner, a research firm, as more consumers turned to tablet computers or smartphones to connect to the Internet. Sony’s share of that total slipped to 1.9 percent worldwide in 2013 from 2.1 percent in 2012, Gartner said, making it the ninth-largest maker of PCs worldwide.
With profit margins under pressure in the PC sector, only a handful of the biggest companies, including the market leader, Lenovo, make money in the business.
“Somebody has to exit from the market because there are still too many competitors,” said Mikako Kitagawa, an analyst at Gartner. “This is an extremely difficult market in which to survive. That is not going to change.”
After splitting off its television business into a subsidiary, Sony said, the new unit will focus on expensive sets, including ultra-high-resolution 4K TVs, while scaling back output of cheaper models.