Sony plans to lay off 20,000

[includes references to PlayStation, etc.]

Sony Plans to Layoff 20,000
By JAMES BROOKE

Published: October 28, 2003

TOKYO, Oct. 28 ? In a bid to turn around the world's second largest electronic company, Sony Corp. executives announced today a three-year revival plan that includes cutting 20,000 workers, or 13 percent of the payroll, ending television production in Japan, radically slashing the numbers of parts and suppliers, and starting a flat screen production joint venture with its main foreign rival, Samsung Electronics.

The plan is designed to save $3 billion over the next three years, boosting Sony's profitability to 10 percent, from a forecast 4 percent this year.

The turn-around plan comes as Japan's once premiere electronics brand struggles with the aftermath of last April's Sony shock. Lower than expected earnings sent its stock plunging, helping to pull Tokyo's Nikkei 225 index to a two-decade low. Although the Nikkei later recovered, Sony's shares have fallen 22 percent this year, making it the third-worst performer on the index. Before today's announcement, Sony's stock closed at 3,960 yen, about 89 percent off its lifetime high of 33,900 yen in March 2000.

In contrast, Matsu****a Electric Industrial Co., the world's largest consumer electronics company by sales, has seen its stock increase by 16 percent, propelled largely by its Panasonic brand.

At today's press conference, audible murmuring rippled through the Japanese press corps when a foreign reporter asked Nobuyuki Idei, Sony's chairman for the last six years, if he should step down.

"Sony is not in the red ink, and compared with two years ago, this performance is actually improving," retorted Mr. Idei, his jaw set. Before turning off his microphone with a defiant click, he added: "I am sorry you had to ask that question, which is incomprehensible to me."

Originally famous in the United States for such hits as the Walkman, Sony has not been able to ride the new, fast-paced electronics market with its Vaio personal computer and Wega TV. The company now heads into the crucial Christmas season with sales slipping for its once enormously popular PlayStation2 video game consoles.

As the news press conference, Sony officials preferred to talk about the turnaround plan that had emerged from their annual October strategy review session.

Sketching out a new worldwide division of labor, Kunitake Ando, the company's president, unveiled a map where Japan was labeled E and C for Engineering and Customers, China and South East Asia were marked C and M for Manufacturing, and Europe and the United States were marked C.

No jobs are to be cut in China, which is to become Sony's main manufacturing center in Asia.

Under this strategy, Sony is to end production by March of cathode ray tubes in Japan. Production lines for these central components of traditional television is to be cut from 17 today to 5 in 2006.

In general, Sony plans to shift production of cheaper mass-market goods to China. Japan would be the company's advance technology base, making such high added-value goods as semiconductors. Of Sony's job cuts, 7,000 are to be in Japan, largely in manufacturing.

Sony has also targeted China as a major consumer market, setting a goal of $4 billion in sales by 2005. Mr. Idei described sales in China as "explosive."

Looking to a fast growing segment of the television market, Sony also announced a $2 billion joint venture with Samsung, to produce liquid crystal displays, commonly known as flat panel screens. With Samsung, the world's second-largest producer of flat screens, production would start in South Korea in 2005.

With South Korean companies emerging as major rivals to Sony, third-quarter profits at Samsung grew by 6.6 percent. At LG Electronics, they jumped by 93 percent. By contrast, Sony announced last week that its July to September profits were down by 25 percent.

Much of Sony's projected $3 billion savings over the next three years is to be squeezed from the groups electronics divisio

 

This is relating to the Sony Consumer Electronics division (TVs, DVDs, video cameras, Viao PCs etc), which is quite separate from Sony Computer Entertainment Electronics (ie. Playstation), SOny Music and Columbia Tristar pictures..

 

But aren't both divisions equally in trouble? And does this mean they're likely to slash prices on PS2's in the near future?

 

Playstation is propping up the rest of the company.

 

The company now heads into the crucial Christmas season with sales slipping for its once enormously popular PlayStation2 video game consoles.

It is called a recession.

Also, I do not like the way this is written. "Once" enormously popular? Last I checked Sony still dominated the market in terms of console ownership.

 

Yeah, I would imagine that just about everyone who would have ever wanted a PS2 would have one by now, so it becomes less about the Console and more about software for it.