A Blog by Jonathan Low


Feb 6, 2014

The Harder They Fall: Sony Exits TVs, PCs, Cuts 5,000 Jobs, Projects Loss in Billions

To understand the scale of Sony's humiliating fall from grace, it is important to recognize that at one time, not so long ago, Sony was to electronics what Apple is now.

Sony was the dominant brand. It had the most advanced technology, the sleekest design, the most talented employees. There was seemingly nothing it could not do, no market it could not conquer if it wanted.

The company was so far ahead in hardware that it decided to buy a Hollywood studio (the former Columbia Pictures, soon renamed Sony Pictures Entertainment) to gain a stronger foothold in content. It led in video games and initiated a foray into computers. Just as thought leaders the world over now want to be seen with an iPhone or iPad, so their generational predecessors wanted to be sure that when visitors entered their homes, the only electronic brand they saw was Sony.

All of which explains the shock at Sony's announced sale of of its TV division and Vaio computer group, the layoff of 5,000 employees and the projected loss of additional billions.

Sony's problems had been evident for years. It had simply not kept up with the more entrepreneurial US, European and even Chinese competitors who came to dominate the technology field. Public economic policy had its impact as well: the 'lost decade' of inflation and low growth, followed by the devastation wrought by the Fukushima earthquake, tsunami and nuclear disaster, severely reduced the ability of the Japanese government - and its once-admired currency - to provide the sort of assistance that had once earned that country the sobriquet ' Japan Inc.'

The moritoria will continue for some time. Cases will be written. Tongues will cluck. Heads will shake. But the reality is that flexibility, adaptability and the capacity to rebound required by this economy remain strategic assets that no system or engineering genius can design or install. JL

Sophie Knight and Reiji Murai report in Reuters via Business Insider:

Having last turned an annual operating profit in the 12 months ended March 2004, Sony's TV business piled up losses of 761.9 billion yen ($7.5 billion) in the nine fiscal years before the current one. Sony officials on Thursday said they expect to lose another 25 billion yen on TVs this year.
Sony Corp stepped up efforts to turn around its unprofitable electronics operations, quitting the personal computers business and splitting its TV division into a separate unit as it warned it expects steep losses this year. The Japanese company said on Thursday the restructuring will cut 5,000 jobs and trim 100 billion yen ($988 million) a year from fixed costs in the longer term. Losses in the TV business have long dogged its efforts to compete with global consumer electronics giants like Apple Inc and Samsung Electronics Co.
With restructuring costs rising at the same time as core mobile and home entertainment businesses fall short of its expectations, Sony said it now forecasts a net loss of 110 billion yen ($1.1 billion) in the fiscal year ending in March. It previously expected a net profit of 30 billion yen.
The job cuts, which will come in both TV and PC divisions, are to be implemented by March 2015. The cost savings are to kick in by the 2015-2016 financial year, Sony said.
Sony said the Vaio PC division, as widely expected, will be sold to investment fund Japan Industrial Partners, which will set up a separate company to take over the operations. Financial terms of the sale weren't disclosed, but Sony will initially hold a 5 percent stake in that company.
The TV operations will be spun off into a separate unit by July 2014, Sony said.

Buoyed by a strong performance in its financial services unit in the October-December quarter, Sony posted an operating profit for the three months of 90.3 billion, up from 46.43 billion yen a year earlier. That was above a consensus forecasts of 71.9 billion yen, the average of estimates from six analysts surveyed by Thomson Reuters I/B/E/S.
But with core businesses like its smartphone, PCs, TVs and audio operations weaker than it expected through the first nine months of the fiscal year, Sony slashed its full-year operating profit forecast to 80 billion yen from the 170 billion yen it previously expected.  


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