Japan’s Sony Corp said it will cut about 4% of its workforce, curb investment and pull out of businesses to save $1.1 billion a year, as the financial crisis ravages demand for its electronics products.
The 8,000 job cuts are the biggest announced by an Asian firm so far in the crisis and underscore the challenges facing Sony, which has fallen behind Apple Inc’s iPod in portable music and is losing money on flat TVs.
But analysts warned the measures may not be bold enough to streamline a sprawling empire that ranges from semiconductors to movies and insurance. The cuts are also risky because they mean Sony will be investing less in future growth. “The number sounds big, but this staff reduction won’t be enough. Sony doesn’t have any core businesses that generate stable profits,” said Katsuhiko Mori, a fund manager at Daiwa SB Investments. “After the workforce reduction, the next thing we want to see is what is going to be the business that will drive the company.”
Sony is not the only one suffering. Japanese rival Panasonic lowered its earnings forecasts last month while South Korea’s Samsung Electronics Co said Monday it would cut capital investment and warned of tough times. Shares in Sony, which have fallen nearly 70% this year, rose 3% to €15.79 in Frankfurt after the announcement. For a graphic tracking Sony’s share price, click: here
Sony flagged the need for restructuring in October when it more than halved its annual profit forecast, blaming slowing demand for its Bravia liquid crystal display TVs and Cyber-shot digital cameras and a firmer yen.
YEN HURTS TOO
Sony, along with other Japanese manufacturers, has also been hit hard by a surging yen, with the currency’s rise to 13 year highs this year cutting into the value of its earnings and making its products less competitive in overseas markets. The maker of Bravia flat TVs and PlayStation 3 video game consoles, said in October when it more than halved its annual operating profit forecast that it would need to close some plants, reduce capital spending and lay off workers.
Hiroaki Osakabe, fund manager at Chibagin Asset Management, said the restructuring was unlikely to trigger a share rally. “The scheme doesn’t contain anything new, like a new earnings pillar or a growth strategy. It was something that people had expected, and I think the market had already discounted the announcement,” he said.
Sony said it would delay plans to boost output for liquid crystal display TVs in Slovakia, outsource production of image sensor semiconductors, and reduce the number of manufacturing sites by about 10% from the current 57. It aims to cut investment in its electronics business by 30% in the next business year to March 2010 compared with a previous business plan. (Reuters)