Sony announces plans to address reform of PC and TV businesses
Press release, February 6; Alex Wolfgram, DIGITIMES [Thursday 6 February 2014]
Sony has announced new measures to address reform of its PC and TV businesses aimed at accelerating the revitalization and growth of its electronics business.
According to the company, Sony has been aggressively implementing a reform strategy across its electronics business, as originally announced in April 2012. In the imaging, game and mobile businesses that Sony identified as the three core businesses that would drive the growth of its electronics business. At the same time, Sony identified PCs and TVs as businesses for which profitability improvement would be a key priority and implemented various reform measures. The reforms executed within the TV business have significantly enhanced its operational structure and product competitiveness. However, Sony now anticipates its target of returning the TV and PC businesses to profitability will not be achieved within the fiscal year ending March 31, 2014, said Sony.
Sony added it is now also taking further significant steps to address reform of the PC and TV businesses, while at the same time moving forward with further optimization and streamlining of its manufacturing, sales and headquarters/indirect functions, and concentrating resources in growth businesses.
PC business
Sony and Japan Industrial Partners (JIP) have concluded a memorandum of understanding confirming the parties' intent for Sony to sell to JIP Sony's PC business currently operated under the Vaio brand.
Following a comprehensive analysis of factors, including the drastic changes in the global PC industry, Sony's overall business portfolio and strategy, the need for continued support of Sony's valued Vaio customers, and future employment opportunities for personnel involved in the Vaio business, Sony has determined that concentrating its mobile product lineup on smartphones and tablets and transferring its PC business to a new company established by JIP is the optimal solution, said Sony. Sony and JIP will now proceed with due diligence and negotiate detailed terms and conditions of the business transfer, targeting the conclusion of a definitive agreement by the end of March 2014. Following reevaluation of the product lineup, the new company is expected initially to concentrate on sales of consumer and corporate PCs in the Japan market and seek to optimize its sales channels and scale of operations, while evaluating possible further geographic expansion, added Sony.
As a part of the business transfer to JIP, Sony will cease planning, design and development of PC products. Manufacturing and sales will also be discontinued after the Spring 2014 lineup to be launched globally. Even after Sony withdraws from the PC market, Sony customers will continue to receive aftercare customer services. Approximately 250-300 Sony Corporation and Sony EMCS employees involved in PC operations, including planning, design, development, manufacturing and sales, are expected to be hired by the new company established by JIP. Sony will also explore opportunities for other employees to be transferred to other businesses within the Sony Group. For employees of Sony Corporation and Sony EMCS that are not hired by the new company or transferred within the Sony Group, Sony plans to also offer an early retirement support program to assist their reemployment outside of the Sony Group, Sony noted.
TV Business
Sony has been engaged in various cost reduction initiatives for the TV business, as outlined in its TV business profitability improvement plan announced in November 2011. These initiatives include enhancing LCD panel-related cost efficiency and rationalizing R&D expenses, while also strengthening product competitiveness and operational efficiency in order to improve marginal profit ratio. Due to these measures, losses from the TV business, which amounted to JPY147.5 billion (US$1.45 billion) in the fiscal year ended March 31, 2012, were successfully reduced to JPY69.6 billion yen in fiscal year 2012, and are now anticipated to be reduced further, to approximately JPY25 billion in fiscal year 2013.
While Sony said it now anticipates that its target of returning the TV business to profitability will not be achieved within fiscal year 2013 largely due to unexpected factors such as the slowdown in emerging markets and declining currency rates, the reforms executed within the TV business over the past two years are putting the business on a path to turnaround. In particular, Sony has significantly enhanced product competitiveness and accelerated its shift to high-end models, especially in the area of Ultra HD, where Sony has secured more than 75% market share in Japan (as of the end of December 2013, based on Sony research). Sony has also taken the number one market share in the US for Ultra HD models (during calendar year 2013, based on revenues).
Sony added it will shift its product mix and focus on increasing the proportion of sales from high-end models in fiscal year 2014. Sony plans to reinforce the company's leading position in the Ultra HD market by strengthening its product lineup while also bolstering its 2K models with wide color range and image-enhancing technologies. In emerging markets, Sony will aim to harness market expansion by developing and launching models tailored to specific local needs. Second, Sony will accelerate and broaden its on-going cost reduction and operational improvement measures, focusing attention across all functions relevant to the TV business, including manufacturing, sales, and headquarters/indirect functions. In addition, to help transform the business into a more efficient and dynamic organization, optimized in size and structure for the current competitive business environment and fully accountable for its operations, Sony has decided to split out the TV business and operate it as a wholly-owned subsidiary. The targeted timeframe for this transition is July 2014. By implementing these measures, Sony is aiming to further enhance its TV business' profit structure and return the business to profitability during fiscal year 2014, the company added.
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