Not all fun and games for electronics giant

Citing need to regroup, Sony announces plans to cut 20,000 jobs from its global workforce

Posted: Thursday, October 30, 2003

TOKYO Sony Corp., its consumer electronics sheen dulled by cheaper competition, is struggling to bounce back with a corporate retooling that will slash 20,000 jobs, or about 13 percent of its global work force.

Sony said the job cuts would occur over the next three years and include 7,000 workers in Japan. It gave no further regional breakdowns or other details. Sony employs some 161,100 people worldwide.

The company's plan is to trim costs while trying to exploit Sony's traditional strengths in entertainment, electronics and video games particularly with new networked and wireless consumer devices.

''It may appear as though Sony is being sucked into a black hole,'' Sony executive deputy president Ken Kutaragi said. ''But we hope to create a 'Big Bang' that will lead to new business.''

As part of the job cuts, Sony said it would integrate overlapping administrative and corporate jobs, such as by relocating mainly to the West Coast electronics and marketing operations currently divided between both U.S. coasts. The company has about 22,000 employees in the United States.

Rick Clancy, a spokesperson for U.S.-based Sony Electronics Inc., said moving most of Sony's East Coast operations to the West Coast may result in a ''few hundred'' layoffs but that the actual number of cuts remain unclear.

In Europe, the new plan will bring together consumer electronics marketing groups to a new location in Britain.

Sony said it plans to reduce fixed costs to increase its operating profit margin to 10 percent from 4 percent.

Credit Lyonnais Securities analyst Kun Soo Lee said the job cuts were bigger than expected and signal that Japanese workers, traditionally accustomed to lifetime employment, weren't going to be protected.

''Sony made it clear that it will trim unnecessary parts of its operations to survive,'' Lee said.

One element of the new strategy focuses on hardware, including the computer chips, for a networked home where electronics, video games, music and video merge in products including flat-panel TVs, DVD recorders and home servers.

Another highlight of Tuesday's announcement was an agreement with Samsung Electronics Co. of South Korea to set up a $2 billion joint venture to develop next-generation liquid crystal display panels for flat TVs.

Among other steps announced by Sony:

Setting up a holding company by April for Sony's three financial businesses Sony Life Insurance Co., Sony Assurance and Sony Bank.

Bringing together engineers in the company's home and mobile electronics sectors, such as cell phones, TVs and game consoles, to enhance development of computer chips and devices.

Trimming production, distribution and service facilities by about 30 percent.

Ending Japanese production of cathode ray tubes for TVs by the end of this year and reducing the worldwide production lines for the increasingly less popular tubes from 17 to five.

Like other Japanese companies, Sony was battered by the global electronics slump and the slide in chip prices two years ago as rivals with access to cheaper labor began to catch up in lower-end consumer electronics.

Sony weathered much of the abuse due to the success of the PlayStation2 in its game unit and blockbusters like ''Spider-Man'' from its film section. But Sony fell behind such domestic rivals as Sharp Corp. in liquid crystal display TVs and Matsushita Electric Industrial Co., which makes the Panasonic brand, in DVD record-ers.

Investors were stunned when Sony sank into first-quarter losses. The Tokyo-based company climbed back into the black in the two following quarters, but its profits are down from a year ago, tumbling 25 percent in the July-September quarter to $304 million.

Sony shares closed up 1 percent at 3,860 yen ($36) on the Tokyo Stock Exchange Tuesday, before the plans were announced.

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