Sony in Last-Ditch Bid to Cut Way Out of Record Losses
Sony plans to eke out a net profit of ¥30 billion ($390 mil.) for the full year this year despite a record ¥455 billion ($5.7 bil.) loss for the last fiscal year ending in March.
The centerpiece of Sony’s strategy is layoffs of 10,000 — 6% of its global workforce — in a bid to cut by half the massive losses suffered by its TV manufacturing business. Sony’s TV business has lost $10 billion during the past eight years as the company failed to keep up with Korean rivals Samsung and LG in innovation, branding and cost-efficiency.
The other half of Sony’s turnaround plan is to shift its focus to smarphones, video games, cameras, medical devices and electric car batteries, according to its new CEO Kazuo Hirai at last month’s press briefing.
“This is our only chance to change,” he said, acknowledging that the company’s options were shrinking due to the loss of its once-vaunted status as the world’s premier consumer electronics brand. Sony’s loss of competitiveness in its core consumer electronics segment coincided with its foray into the movie business with the purchase of Columbia and Tri-Star studios.
Hirai said his goal is to boost group sales to ¥8.5 trillion ($113 bil.) within two years while achieving an operating margin of 5%.
More recently Sony announced that it plans to sell 33 million smartphones in 2012, up from 22.5 million in 2011. If it achieves this goal it would rise to fifth place in global smartphone sales, behind Samsung with a projected 180 million units, Apple with 150 mil., Nokia with 46 mil. and Blackberry with 40 mil. Currently HTC is in fifth place with a projected 29 mil. units expected to be sold in 2012. Global smartphone sales for this year are expected to total about 700 million.
But due to a virtually non-existent brand image in the smartphone segment and the absence of any significant innovation, Sony’s smartphone sales are likely to fall among second tier firms, according to most analysts. Reflecting a gloomy view of its prospects for a significant turnaround, Sony shares slipped to its lowest level in a quarter century this week. Shares have fallen 12% since the start of the year even as the Nikkei 225 gained nearly 7%. That puts Sony’s market cap at $15 bil., about 14% of Samsung’s and 3% of Apple’s.