Sony revival plan: Cut 10,000 jobs; refocus on phones, TV, gaming

Summary:Sony, only days after announcing a $6.4 billion loss, double its previous estimates, is to shed 10,000 jobs, or 6 percent of its workforce in the next 12 months.

Days after Sony announced a $6.4 billion loss for the last financial year, chief executive Kazuo Hirai announced that 10,000 employees --- around 6 percent of its workforce --- will lose their jobs in a major reorganisation of the company.

The cuts will be made over the coming 12 months.

Reports emerged earlier this week that Sony's would cut as many as 16,000 employees worldwide, despite the company's silence, including many in its loss making chemical division.

To get the company back on track, Hirai's revival plan will focus the company's efforts on three areas: mobile devices, digital imaging, and its games consoles, with the hope the reshuffle would generate sales of $10.5 billion by March 2015 --- a profit margin of 5 percent --- compared to sales of $7.9 billion in the last financial year.

There's also a rising sector for Sony in the burgeoning medical space, as it eyes further opportunities in the industry. The company said it was looking for acquisitions and other "strategic" investments to generate further income. But Sony will have to overcome the shadow of medical equipment maker Olympus, the disgraced company linked through financial ties, as it battles with a $1.7 billion accounting fraud.

The company reorganisation will cost Sony $926 million during this financial year.

Sony competes on multiple fronts with its rivals, particularly with Apple and Samsung, which has become a global powerhouse in industries it covertly set out to achieve.

Its success came with the iPhone and iPad in particular, with high-performance game titles appearing for the iOS platform, along with camera technology that suits as a strong alternative to the traditional digital imaging market. In Walter Issacson's biography of the late Apple co-founder, it notes how Steve Jobs "perfected" the Apple television, thought to hit the market this year. Encroaching on territory it has yet to conquer, Apple's strategy in its already-established markets sets the company up for a high chance of success.

Hirai said he would widen the PlayStation Network further to integrate all Sony devices, replacing the three fragmented delivery platforms it operates. Details were sparse, with analysts complaining that Sony has had these plans "for a decade".

With the poor reception on the recently launched PlayStation Vita, Sony is hoping to regain control of its popular gaming sector. The handheld gaming console suffered a 20 percent price cut within its second week of launch, reports ZDNet's Hana Stewart-Smith. Sony said it had a "relatively successful initial launch", selling around 320,000 units in the first week, but the figure dropped to just over 70,000 by the end of the first fortnight.

Samsung remains a strong competitor also to Sony in smartphones and televisions. Sony's television business continues to haemorrhage money as it has over the past eight years. It has lost around $10 billion in the past ten years as it builds roughly 20 million sets a year.

That said, Reuters reports that Sony, Sharp, and Panasonic, Japan's three biggest television set makers, expect to report a combined loss for 2011 of $21 billion --- a figure by far more than Sony's entire market value.

But while it fails to generate profit for Sony, the company will rapidly reduce the number of models it makes by 40 percent by 2013.

The fact remains that unless Sony takes swift measures to reorganise itself, it cannot continue generating mass losses. Sony's efforts will hurt short-term but could lead to better investments, a reduction in loss-making side businesses, and return the company into profit within a couple of years.

But its lacklustre approach to tackling the competition could lead to further jobs being cut, just as the company tries to stay afloat. In an age of austerity, growth is needed to pull a country or a company out of difficult times. Instead of cutting jobs and slashing output, growth can be met by reinvesting into core quarters of a business.

With Sony, it's a simple case of failing to catch up with the market competitors. Will the tortoise win the race against the hare? It's unlikely, but at least for now it's still in the long-running marathon as it sprints to catch up.

Image credit: Sarah Tew/CNET.

Related:

Topics: CXO, Data Management, Enterprise Software, Hardware, IT Employment, Software

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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