Sony May Get New Life by 10,000 Cuts
Ten thousand Sony employees may face pink slips soon, if a recent report is accurate. The company is gearing up to slash about 6 percent of its total workforce in the coming weeks and kick off a major reorganization. Exactly which departments may get the ax is unclear, but the company certainly has a lot of branches to consider.
04/09/12 3:45 PM PT
Sony will lay off 10,000 workers, or about 6 percent of its global workforce, as part of an overall corporate restructuring plan, according to a report from Japan's Nikkei newspaper.
The cutbacks are set to take place over the next two fiscal years, according to the report. It's unclear when the Japanese company will start slashing jobs or which divisions will take the hardest hits.
Hightened competition from companies such as Apple and Samsung has threatened Sony's position in the consumer device field. CEO Kazuo Hirai announced that the company will have to make "unavoidable, painful changes" to turn the business around when he took over as chief executive in April.
Before becoming CEO, Hirai ran Sony's consumer products businesses. He is largely credited with making the company's gaming business, the PlayStation, an important, profitable asset. When he took over, the company restructured its organizational flow charts, making Hirai directly in charge of Sony's TV business, which is forecast to lose money for the eighth consecutive year.
Sony didn't respond to our requests for confirmation and further comment on the story. The company is expected to provide more details about the plan at its corporate strategy meeting on Thursday, according to a Wall Street Journal report.
Turning Off the TV
The TV business is one of Hirai's new responsibilities; however, "TV hardware is not a very profitable business in nature as many TV vendors have been losing money for years," Jia Wu, senior analyst at Strategy Analytics, told the E-Commerce Times.
It's not just the nature of the business that's been hurting Sony, though, said Wu. Unlike current leaders Samsung and LG, Sony made strategic moves in its TV division that didn't allow it to design innovative products at the speed and consistency with the rest of the industry.
"Sony was also hurt by its plan adopting Google TV two years ago, which has hindered them to define a clear strategy for smart TV" said Wu.
Sony needs to make sure the reported layoffs are in divisions outside of the company's core business and continue to focus on devices that largely in demand, said Wu.
"Sony needs to focus on a few products that are growing and more profitable, such as smartphones and tablets, and redefine or get rid of some of the legacy products such as cameras and laptop PCs," said Wu.
Trimming Off the Edges
While the TV market's profits may be running dry, Hirai's previous warnings that the company would face severe trimmings are an indication that the company is serious about restoring its place as a leader in the electronics marketplace, according to Gerry Purdy, principal analyst at MobileTrax.
Sony has plenty of advantages in the market, Purdy said. It is a respected and trusted brand name, and it has a significant presence in the entertainment, music and gaming industries.
The entertainment presence, led by the popularity of the PlayStation gaming system and its wealth of content with Sony Music, TV and Pictures, can help the company make a tablet or line of smartphones that are "entertainment-centric" and can compete with the ecosystems already in place with iTunes and the Android Marketplace.
"What Sony needs to do -- and, do it very quickly -- is to create the equivalent of Apple's iTunes and iCloud services. Sony needs to develop a rich media library, player and cloud synchronization," he said.
If the company hasn't done it by now, though, said Purdy, it may have bitten off more than it can chew.
"I'm skeptical -- hopeful, but skeptical -- they can pull it off. There are lots of assets but it's so hard to execute across different divisions," he said.