Electronics companies, mobile handset vendors, and electronics retailers are all being added to the growing list of companies that are taking a beating at the heavy hands of a struggling global economy. The latest electronics firm to announce massive losses is Sony.
Sony warned today that it would post a record loss of $2.9 billion due to falling demand for its core electronics and other offerings and a stronger yen. The $2.9 billion loss Sony is warning about is more than twice the amount of loss Sony was expected to report last week.
The massive operating loss is the first in 14 years for the industry stalwart with a massive and diversified portfolio including everything from gaming consoles and computers to movie production and investing arms.
Naoki Fujiwara, a fund manager at Shinkin Asset Management told Reuters, "Sony needs further restructuring, not just cost-cutting but a revamping of its business operations."
In response to the massive loss, Sony is reporting the company will significantly accelerate restructuring plans that were already in motion and more than double its cost cutting goals for January 2009 through March 2010 to 250 billion yen.
Part of these cost-cutting methods will include ending TV production and design operations at one of the firms Japanese plants and consolidating those operations into another Sony plant in Japan. Sony also reports that it plans to shed 30 percent of its workforce in its worldwide TV design operations.
Sony will also be consolidating resources for its battery and small to mid size LCD panel operations along with cutting pay for directors and managers within the company. According to Sony, charges from the cost cutting and consolidation measures will cost it 170 billion yen.
A Sony spokeswoman told the AP that the scale of the proposed payroll cuts had not yet been determined. Sony also says that about 2,000 of the 16,000 jobs it plans to cut will be through early retirement and other programs.
Sony had previously offered details on its restructuring plans that include reduced investing, closing five or possibly six of its plants, and laying off a total of 16,000 employees from regular and contract positions globally. The company says it expects cost savings from its consolidation, closure, and job cuts to total 100 billion yen per year.
Some analysts don’t think that Sony's proposed cost cutting methods are enough. Analyst Eiichi Katayama from Nomura Securities told Reuters, "Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company. It will have to start cutting development costs in addition to production costs."
Not all of the losses Sony has reported can be attributed to its core electronics business. Sony's financial unit has suffered losses thanks to a rising yen and a loss in the Japanese stock market that chopped the value of securities Sony owned. Another big factor is the fact that exports from Japan as a whole dropped 35 percent in December compared to shipments in December of 2007.