Sony will cut about 10,000 jobs, which equates to about six percent of its global workforce, around the end of the year, according to Japanese newspaper Nikkei. The move comes after an extremely poor annual forecast and the hiring of a new CEO, Kazuo Hirai, on April 1. Hirai looks to downsize the Japanese electronics maker and pivot in a new direction to get profit out of the red for the first time in four years.
On April 5, Sony more than doubled its loss forecast for fiscal 2011 to $2.9 billion, blaming floods in Thailand, poor foreign exchange rates and a failed partnership with Samsung. TVs were down almost 30 percent in sales -- a microcosm of the general maiase for TV makers in general, contributing to a combined $17 billion in losses between itself, Sharp and Panasonic. The company's sales for home audio, video and digital imaging also dipped, and while the company cut the price of its Playstation 3 in August, sales of the gaming console still suffer.
In response, Sony will reportedly sell off its chemical products division and cut about 3,000 workers. The Tokyo-based company also looks to make cuts within its small and midsize LCD operations; in all likelihood, this move is intended for Sony to better compete with Samsung, which is the world's No. 1 supplier of TVs and flat screen panels. It wasn't clear if Sony would be cutting these jobs in Japan, overseas, or both.
On April 1, the same day Hirai was made president and CEO of Sony, the company merged its 2,000-person Mobile Display Unit with other small LCD panel businesses from Toshiba and Hitachi to form a new group called Japan Display. This move parallels an earlier move made by Samsung, which similarly spun off its LCD business division to launch a new entity called Samsung Display Co. That company, which also went live on April 1, would also review a merger of the company's LCD and OLED operations as OLED tech picks up steam.
The spin-off will allow us to make quicker business decisions and respond to our clients' needs more swiftly, said Donggun Park, Samsung's executive VP of its LCD business. Through enhancements in business competitiveness, we will continue to provide superior products and services for the market.
The new Japan Display division could help Sony boost its flat screen sales, but some analysts believe Sony is no longer a competitive player in the TV and flat screen game.
Under a new CEO, it's easier to cut jobs or go in a new direction, said Yuuki Sakurai, the head of Fukoku Capital, a fund management firm based in Tokyo. One of the things I'd like to see is that they shift their resources to other areas outside TVs ... If they stick to TVs, they may have to fight a war they may not be able to win.
Even though Sony seems like it's fighting a losing battle against bigger dogs in the industry, the Japanese firm can learn a thing or two from Apple when it suffered its own decline in the mid-1990s.
Before Steve Jobs returned to Apple, the company was bleeding out money and falling behind in innovation, just like Sony is. But what Jobs did to revive Apple was to do what Sony is doing now: Slim down, and refocus on what made the brand great in the first place.
If Sony is smart, it will jump on the OLED bandwagon, which is picking up steam for its ability to produce richer colors and better pictures than LCD in a limited amount of space -- think of large, gorgeous TV displays thinner than a pencil. Samsung primarily features its OLED displays on its mobile devices, such as the Galaxy S II smartphone. Considering how OLED wowed audiences at CES 2012 with its gorgeous displays and wafer-thin designs, Sony simply wants to keep in stride with Samsung and LG in the greater display race.
Sony, which employs roughly 168,200 workers on a consolidated basis, may also ask its seven-person executive board to return their bonuses to the company. The board includes Howard Stringer, the former CEO of Sony, who now serves as the company's chairman. However, if Sony looks to thrive again, Hirai may consider cutting his entire executive staff. When Jobs returned to Apple, he only left two board members and cut everyone else. To prove to investors that you've changed, profound changes need to take place at the very top.
Hirai hopes these layoffs can show investors that Sony is serious about becoming a lean, agile company that can compete with the big boys of display-making. A $2.9 billion projected loss for the year is the last straw for Sony, which hasn't seen profit in over four years. If the company looks to move ahead, it must be smart about its fiscal decisions, and spinning off its display business is a good start. It may be too late to get back into MP3 players, but it's never too late to innovate something we've never seen before.