– PC business and Vaio brand to be sold
– TV business to become a wholly-owned subsidiary with a focus on high-end panels
– 5,000 jobs cut globally across sales, manufacturing and head office roles
Sony Corporation has announced a massive restructure of its global business overnight, laying out a roadmap that will see the company shed its PC business to focus on tablets and smartphones, shift its TV business to focus on higher-end models, and cut 5,000 staff world-wide.
The news comes as the company admits it has struggled in “returning the TV and PC businesses to profitability” and that this goal will not be achieved by the end of Sony’s fiscal reporting year in March 2014.
The changes to the business will result in significant restructuring costs (amounting to 70 billion Yen, or approximately AUD $766 million, this year alone) and a “head count reduction” in the manufacturing, sales and headquarters staff and “indirect functions” that support these businesses.
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PCs: The sale of the Vaio brand
Recognising that imaging, gaming and mobile devices are the categories driving growth globally, Sony confirmed it would exit the PC space and “cease planning, design and development of PC products”. Sony will no longer manufacturing or sell Vaio computers after the launch of its (northern hemisphere) spring 2014 line-up.
Sony is negotiating a deal with Japanese Industrial Partners (JIP), set to be firmed up by March this year, with the new owners “expected initially to concentrate on sales of consumer and corporate PCs in the Japanese market”. Once the company has optimised operations and sales in Japan, Sony confirmed that distribution may expand further.
With the sale of this core business, approximately 250 to 300 staff will move to the new business created by JIP, while Sony “will also explore opportunities for other employees to be transferred to other businesses within the Sony Group”. Those who are not relocated will be offered “an early retirement support program to assist their reemployment” according to the company.
Although the full ramifications for the Australian market are not yet known, Sony Global indicated that “Sony customers will continue to receive aftercare customer services” and Appliance Retailer understands that this will also be the case for Australian consumers.
The exit from PCs will see Sony “concentrating its mobile product lineup on smartphones and tablets” from here forward.
TV: A shift to premium panels
Although Sony has managed to staunch the losses in its TV business, down from 147.5 billion Yen in FY11 to an anticipated 25 billion Yen in FY13 (year ended 31 March 2014), the business is not yet profitable. The company pointed to “unexpected factors such as the slowdown in emerging markets and declining currency rates” as the major cause for this weakness.
That said, Sony has recognised the “continued importance” of its TV business; already, the company has made moves towards higher-end products, such as 4K panels, and this will also be the focus going forward:
Sony will shift its product mix and focus on increasing the proportion of sales from high-end models in FY14. Sony plans to reinforce the company’s leading position in the 4K market by strengthening its product lineup while also bolstering its 2K models with wide colour range and image-enhancing technologies.
In emerging markets, Sony hopes to increase its share by “developing and launching models tailored to specific local needs”.
Sony is aiming to reduce costs by “focusing attention” on roles in manufacturing, sales and management with a view to potential downsizing. In addition, the company will split the TV business into a wholly-owned subsidiary in order to create a business that is “a more efficient and dynamic organization, optimized in size and structure for the current competitive business environment and fully accountable for its operations”.
Downsizing: “Headcount Reduction” and cutting costs
Sony has foreshadowed that it will “identify focused product categories for each specific country and region” and rationalise its staffing with the hoping of reducing costs by 20 per cent in 2016 (FY15, ended 31 March 2016, compared with FY13). Manufacturing sites and head office roles will be targeted for further cost savings.
With the PC and TV category restructures and the changes sweeping across the entire business worldwide, Sony anticipates a “headcount reduction” of approximately 5,000 staff (1,500 in Japan, 3,500 overseas) by the end of FY14 — a cut to be made in just under two months.
The changes will result in restructuring costs of 140 billion yen in FY13 and FY14 (AUD $1.53 billion), and expected savings of 100 billion Yen per year, starting in FY15 (AUD $1.09 billion).