Sony reorganisation gathers pace


Financier Worldwide Magazine

April 2014 Issue

April 2014 Issue

Since Kazuo Hirai assumed the role of chief executive of Sony in April 2012, the group has undergone an extensive program of restructuring. Much like the company’s historic rivals Panasonic and Sharp, Sony has struggled to keep pace with technology heavyweights Apple and Samsung in recent years.

The reorganisation of the company continued at pace in February when the group announced that, as a result of its many misfiring units, Sony expects to record a $1.1bn loss for the financial year 2013-14. As a response to this dire financial outlook for the year, Sony has made public its intention to shed over 5000 jobs; around 3 percent of its global staff. The company also announced that it has sold off its personal computer business and will split its television division into a separate unit. It is hoped that these changes will drastically reduce annual fixed costs by around ¥100bn.

The latest stages of the Hirai reorganisation came after Sony failed to meet a pledge to end TV losses over the last year and spark a revival of the troubled group. Sony intends to spin off its television division and turn it into a wholly-owned subsidiary run separately from the rest of the group. Sony hopes this move will enhance the group’s profit derived from selling its television sets. The company expects to have completed the transition by July 2014. The job cuts, 3500 of which will stem from outside of Japan, will be implemented by March 2015. The cost savings associated with those job losses are likely to be felt in the 2015-16 financial year. Sony said it expects the company’s television unit to lose another ¥25bn this year, which would amount to the tenth straight annual loss for the business.

The sale of Sony’s PC VAIO brand to Japanese investment fund Japan Industrial Partners (JIP) for around $490m has been rumoured for some time, with the division grossly underperforming compared with other units in the Sony portfolio. Both Sony and JIP expect the deal to be finalised and completed by 1 July 2014.

It is hoped that these changes will drastically reduce annual fixed costs by around ¥100bn.

Although Sony is shedding the PC unit, it is still expected to be heavily involved in the development of the VAIO brand. The new PC business will be based at the Nagano Technology site, a location which is currently still the hub of Sony’s PC operations. Once the new business is up and running, it is likely to hire around 250 to 300 Sony employees currently engaged in the company’s PC related operations. Staff from the planning, design, development, manufacturing and sales divisions at Sony and Sony Group companies in Japan are all expected to migrate over to the sold off PC unit in the coming months. Furthermore, while the new company will be established and operated with capital investment and management support from JIP, Sony will initially invest 5 percent of the new company’s capital to support its launch and make the transition to the new ownership as smooth as possible.

Sony had previously announced its intention to focus on mobile devices, games and imaging products as Mr Hirai did not consider the PC unit to be one of Sony’s core businesses. Compared with some of its other units, Sony’s PC business has been a comparatively small player, accounting for around 2 percent of the company’s global sales. Sony sold less than six million of its VAIO branded computers in 2013, a drop of 33 percent compared with 2010. By way of comparison, the overall PC market shrank around 10 percent over the same period. Indeed, although the VAIO business has underperformed significantly compared with other Sony brands, the decline of the group’s computing unit has echoed the wider PC sector. The market has been on a downwards trajectory for a number of years. According to data released by technology research firm Gartner, PC sales fell 6.9 percent to 82.6 million units in the fourth quarter of 2013. Throughout 2013 the PC market retracted by around 10 percent.

Sony’s reorganisation plan did not end with its PC and television units, however. In February, the tech giant also announced plans to end its failing eReader business in the US. Sony will close its ebook store in North America in late March. The company noted that its customers and their existing ebook libraries will be transferred to rival eReader company Kobo under the change.”Kobo is the ideal solution for our customers and will deliver a robust and comprehensive user experience,” said Ken Orii, vice president of Sony Electronics’ digital reading business division in a statement. “Like Sony, they are committed to those most passionate about reading and share our vision to use open formats so people can easily read anytime and anywhere.”

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Richard Summerfield

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