Sony Corp. announced that it will undergo a massive restructuring with widescale cutbacks to reinvent itself for the digital age.
The company, based in Japan, will focus on making networkable computers, cell phones, pagers, and even TV sets that can communicate with each other, according to the announcement. In the process, it will cut its work force by 17,000 and slash the number of factories it operates worldwide.
“In the last three years, we have made a lot of effort to move from being a ‘box’ company to becoming an information technology company,” Nobuyuki Idei, Sony’s president, said in an interview. “I think we’ve had a fair amount of success.”
The company says the move won’t affect its U.S. K-12 market. “The announcement that was made has no immediate direct effect on Sony electronics distance learning or education-related businesses here in the U.S.,” company spokesperson Rick Clancy told eSchool News.
“In fact, it has no direct effect on any Sony business in North America,” Clancy added.
Sony’s announcement comes at a time when corporate Japan has been struggling with a stubborn recession at home and an economic crisis in Asia that has severely diminished demand in the region.
Unlike many of its competitors, Sony still is making money. But the company expects profits in the fiscal year ending in March to be almost one-third less than last year.
Out with the old, in with the new
Especially weak have been earnings on Sony’s TVs, VCRs, and portable stereos. Company executives believe making money on these goods will only grow more difficult, Sony president Idei said.
The organizational changes represent a bet that products such as computers, digital cameras, and PlayStation video game consoles will be more important to the company’s future than Walkman stereos and its well-known TVs.
“We are expanding our strong divisions and trimming the weak areas,” Idei said. “We have to evaluate what sort of businesses will create the most value in the long-term.”
The job cuts, equal to 10 percent of Sony’s work force, are to be completed by March 2003. They will come mostly from limiting the number of new employees Sony hires each year instead of from layoffs, Idei said.
He said employees who lose jobs related to manufacturing analog products such as tape players and VCRs will be retrained to make digital-age goods such as computers and camcorders. The cuts will be made worldwide, but the company did not provide additional details.
Sony will close 15 manufacturing facilities around the world, leaving it with 55 plants by 2003, Idei said. The company would continue to “invest aggressively” in research and new production equipment, he said.
Other changes include incorporating the company that makes the popular PlayStation video game console, Sony Computer Entertainment, into Sony Corp.’s main electronics business.
Idei said the new division would be one of “four pillars” of Sony’s electronics business, which would also include a unit to manufacture traditional TVs, VCRs, and audio products; one focusing on cellular phones, computers, and digital cameras; and another to develop the computer chips, batteries, and disk drives used in a variety of Sony products.
Sony Corp. will also buy up the shares of three publicly traded affiliates–Sony Music Entertainment Japan Inc., Sony Chemical Corp. and Sony Precision Technology Inc.–to make them wholly owned subsidiaries.
Credit rating agency Moody’s Investors Service praised the changes, saying it would keep one of its highest ratings on Sony.
“This move will better enable the group to pursue its corporate strategy,” Moody’s said in a report.
In a related development, Japan’s biggest computer maker, NEC Corp., said last month it would cut 15,000 jobs, or 9.7 percent of its work force, over the next three years as it struggles to recover from massive losses at its Packard Bell division.