Sony To Slice 16,000 Jobs By March 2010 — PlayStation Business Included?

Tue, Dec 9, 2008

Nintendo may be sitting pretty on top of the fat stacks of cash it made from selling 800,000 Wiis this Thanksgiving week, but out in the greater business world it's not all fun and games. Today, Sony Corporation announced that it has "embarked on a series of measures to strengthen its corporate structure and bolster profitability" that will see a 30% reduction in their electronics business, close 10% of their 57 factories, and cut 8,000 permanent jobs -- and an additional 8,000 temporary positions -- by March 2010.

Though Sony plans to make the majority of cost reduction measures toward the sum of 100 billion yen in its struggling electronics business, which is a separate entity from the Sony Computer Entertainment responsible for PlayStation, sources are reporting that PlayStation may be under scrutiny as well.

This morning, MCVUK and Gamesindustry.biz both received the following statement:

"In order to stay competitive in the accelerating global network environment, we will always carefully review and make structural changes, if necessary, in order to further expand and strengthen the PlayStation business around the world."

Though "expand and strengthen" might well be viewed as corporate doublespeak, GameCyte wonders if expand might actually be accurate. Several times in Sony's press release below, the company speaks of realigning, reallocating, reassigning and outsourcing, and a number of financial sources are today citing the relative strength of the yen as a reason they must do so.

Like Square Enix and Namco Bandai, Sony may intend to do just that: expand and strengthen around the world, as opposed to maintaining the same size in Japan.

However, that's only if the company doesn't announce even more cost reduction efforts soon. Though Sony says that they intend to "downsize or withdraw" from "non-core businesses," Daiwa SB analyst Katsuhiko Mori told the BBC that Sony simply doesn't have any particular businesses that qualify as "core" to begin with, and that more job cuts might be on the way.

For what it's worth, Sony Computer Entertainment America added eight job postings for its Foster City offices this morning.

Press release:

Tokyo, Japan, December 9, 2008 – Sony Corporation ("Sony") has embarked on a series of measures to strengthen its corporate structure and bolster profitability across the Sony Group. These initiatives are in response to the sudden and rapid changes in the global economic environment.
Particularly within its electronics business, where Sony has been most affected by the acute downturn in the economic climate, the company has already undertaken certain short-term measures, including adjusting production, lowering inventory levels, and reducing operational expenses. Going forward, Sony intends to adjust product pricing to mitigate the impact of the appreciation of the yen, curtail or delay part of its investment plans, and downsize or withdraw from unprofitable or non-core businesses. Furthermore, Sony plans to realign domestic and overseas manufacturing sites, reallocate its workforce and reduce headcount.
Through these measures, Sony will aim to establish a corporate structure capable of delivering estimated total annual cost savings of more than 100 billion yen by the end of the fiscal year ending March 31, 2010.
Details of the initiatives to be implemented within the electronics business at this time are as follows:

1. Review of investment plan

Sony has carefully reviewed the investment plan outlined in its Mid-Term Corporate Strategy Update, with the aim of sharpening its focus consistent with Sony's growth strategy, and is reducing or postponing planned investment as appropriate. Specifically, within the semiconductor business, Sony intends to cut investment expenditures this fiscal year by outsourcing a portion of its planned increase in manufacturing of CMOS image sensors for use in mobile phones to third parties.

In addition, following the rapid demand slowdown in television markets, Sony has decided to postpone recently considered plans to invest in production expansion at the Nitra plant in Slovakia, which is one of Sony's sites assembling LCD televisions for the European market.

Based on such measures, Sony is planning to reduce investment in the electronics business by approximately 30% in the fiscal year ending March 31, 2010, compared to its mid-term plan.

2. Realignment of manufacturing sites

By the end of the current fiscal year, Sony plans to cease production at two overseas manufacturing sites, including Sony Dax Technology Center in France, which manufactures tape and other recording media. By further advancing initiatives including rationalizing its manufacturing operations, shifting and aggregating manufacturing to low-cost areas, and utilizing OEM and ODM partners, Sony plans to reduce the total number of manufacturing sites by approximately 10%, from the current total of 57, by March 31, 2010.

3. Workforce reallocation and headcount reduction

Through measures including the realignment of its manufacturing sites, a review of its development and design structure, and the streamlining of its sales and administrative functions, Sony will implement a company-wide (including Headquarters) rationalization. Sony intends to reallocate and optimize its workforce through programs including work reassignments and outplacements.

As a result of these measures, by March 31, 2010, Sony plans to reduce headcount in the electronics business worldwide by approximately 8,000, out of approximately 160,000 as of September 30, 2008. At the same time, Sony plans to reduce headcount in its seasonal and temporary workforces.
In addition to these measures, Sony will continue to implement measures as required to help assure both short and longer-term profitability and growth.

Sony plans to outline the anticipated impact of these measures, including anticipated expenses related to their implementation, in Sony's updated forecast of financial results for the current fiscal year to be included in its third quarter earnings announcement, scheduled for January 2009.