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Sony to Cut 20,000 Jobs Over Three Years

Tue Oct 28, 7:25 AM ET

By Daisuke Wakabayashi and Nathan Layne

TOKYO (Reuters) - Sony Corp (NYSE: SNE -news ) ( news -web sites ) said on Tuesday it will cut its work force by 13 percent or 20,000 jobs in the next three years, while focusing on cutting-edge semiconductors to revive an aging product lineup and overhaul its struggling electronics business.

The entertainment and electronics giant, giving details of a three-year, $3.1 billion restructuring plan announced earlier this year, also said it will establish a liquid crystal display (LCD) joint venture with Samsung Electronics

"People have said we have fallen into a black hole and these are our first steps out," said Executive Deputy President Ken Kutaragi at a news conference.

While Sony was unveiling a series of steps aimed at restoring profitability, rival Matsushita Electric Industrial, maker of Panasonic brand products, said quarterly net profit jumped 32 percent from DVD recorders and flat panel televisions.

Sony aims to reach an operating profit margin of 10 percent and slash annual fixed costs by 330 billion yen by 2006/07. Price competition with more cost-efficient rivals and mounting inventory pushed its margin down to 2.5 percent in 2002/03.

The company said it will hive off its financial units -- Sony Life Insurance Co, Sony Assurance Inc and Sony Bank -- into a holding company to be established in April. It said it will consider an initial public offering for the holding company.

For the three years ending in March 2006, Sony said it had earmarked restructuring charges of 335 billion yen ($3.09 billion), 300 billion yen targeted solely at electronics, which account for 65 percent of consolidated revenues.

The total restructuring cost was up from the company's original estimate of 300 billion yen.

"The year 2006 is a goal point for us," said Chief Executive Nobuyuki Idei. "We envisage that the world of broadband and wireless networks will be very prevalent. That's what we have been preparing for in the last few years."

April's "Sony Shock" put its troubles in the spotlight. It stunned investors with an unforeseen quarterly loss of almost $1 billion, resulting in it losing a quarter of its market value in two days, prompting shareholder calls for action.

"This could be considered a stepping stone, the building of a new foundation. It's nothing surprising, but it's important that Idei is taking these steps," said John Yang, an equity analyst at Standard & Poor's in Tokyo.

"It all shows that Sony does have a sense of urgency now."

Prior to the announcement, Sony shares closed up 1.05 percent at 3,860 yen compared to a 1.28 percent rise on Tokyo's electric machinery sub-index IELEC.The stock has plummeted 89 percent from a lifetime high of 33,900 yen in March 2000.


Sony has said it expects electronics sales to improve in the six months to March 31, but now its games division -- hitherto an engine of growth -- appears to be slowing.

For the three months to September 30, sales in the games division fell by more than one-third, prompting a 25 percent slide in net profit.

"It's not clear what the pillar of Sony's profits is going to be," said Akio Yoshino, general manager at SG Yamaichi Asset Management.

Kutaragi, who is credited with making the PlayStation 2 ( news -web sites ) game console a success, said the company's growth will come from its ability to differentiate its digital consumer electronics products with components unique to Sony.

Along with being the head of its games unit, Sony Computer Entertainment, Kutaragi will now direct the company's strategy in developing next-generation displays, imaging devices and cutting-edge semiconductors.

"Chips are really the heart of digital goods and their importance will only grow with time," Kutaragi told reporters. Sony plans to invest 500 billion yen over the next three years in semiconductors, including research and development for a high-powered microprocessor code-named "cell" that is being developed with Toshiba Corp and IBM

Analysts expect the chip to power Sony's next-generation game console, but the company aims to make "cell" the global standard for consumer electronics in the high-speed Internet era.


Sony's restructuring will include a cut of about 20,000 jobs in its global work force of 154,500, excluding those in financial segments.

The cuts will include 7,000 jobs in Japan, but Sony President Kunitake Ando said the company was not prepared to say if certain domestic factories would be targeted.

Two Japanese factories manufacturing bulky cathode ray tube (CRT) TVs were expected to be hard hit as Sony focuses on slimmer, flat-screen models.

To ensure a steady supply of LCD screens for TVs, Sony announced a $2 billion joint venture to make flat screens for televisions with Samsung.

"Sony is very strong at developing things by itself, but we are now in an era where teaming up with others is a way to propel growth," Idei said.

The venture will begin full production in mid-2005 and be run by an executive from Samsung, the world's second-largest maker of LCD panels. Sony said it plans to continue procuring panels from other manufacturers.

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“The greatest danger in times of turbulence is not turbulence; it is to act with yesterday’s logic”. — Peter Drucker

The shift from manual workers who do as they are being told — either by the task or by the boss — to knowledge workers who have to manage themselves ↓ profoundly challenges social structure

Managing Oneself is a REVOLUTION in human affairs.” … “It also requires an almost 180-degree change in the knowledge workers’ thoughts and actions from what most of us—even of the younger generation—still take for granted as the way to think and the way to act.” …

… “Managing Oneself is based on the very opposite realities: Workers are likely to outlive organizations (and therefore, employers can’t be depended on for designing your life), and the knowledge worker has mobility.” ← in a context




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