Sony cuts 5,000 jobs, exits PC business and tips $1b loss

TOKYO — Sony warned Thursday it would book a $1.08 billion annual loss as it cuts 5,000 jobs and exits the stagnant PC market this year, indicating that the once-mighty electronics giant struggles to reinvent itself in the digital age.

The shock news comes a week after Moody’s downgraded its credit rating on Sony to junk, saying the maker of Bravia televisions and PlayStation game consoles had more work to do in repairing its battered balance sheet.

Japan’s embattled electronics sector, including Sharp and Panasonic, has faced serious challenges from foreign rivals such as US giant Apple and South Korea’s Samsung as they were outplayed in the smartphone and low-margin television business.

Sony said Thursday the job cuts would save about $1 billion a year starting from early 2015, and announced the sale of its Vaio-brand PC division to a Japanese investment fund.

The deal with Japan Industrial Partners was reportedly worth between 40 billion yen ($400 million) and 50 billion yen. No financial details were disclosed.

Citing “drastic changes” in the computer market, Sony said it would concentrate on its lineup of smartphones and tablets and “cease planning, design and development of PC products”. The firm is a small player in the global PC business.

Sony chief Kazuo Hirai said the moves were aimed at “accelerating the revitalisation and growth of our electronics business”.

“But the environment surrounding electronics will get more severe and it will be hard for us to achieve the goal we set for our PC and TV businesses,” he told reporters in Tokyo.

Sony noted that the TV business would not be profitable in the current fiscal year to March, in which it expects to lose 110 billion yen. The bulk of those losses are tied to restructuring costs.

Sony has pinpointed digital imaging, video games and mobile as the units which it hopes will lead a turnaround in its core electronics business.

Unlike Panasonic, which has abandoned consumer smartphones, Sony has seen buoyant sales of its Xperia offering and record sales for its new PlayStation 4 console. 

Its entertainment arm, which includes a Hollywood studio, and a little-known insurance business also make money.

But Hirai, who has led a sweeping restructuring including asset sales that saw the $1 billion sale of Sony’s Manhattan headquarters, has shrugged off pleas to abandon the ailing television unit. On Thursday, he said Sony would strengthen its focus on the high-end TV business.

The firm also turned down a call from US hedge fund boss Daniel Loeb to spin off 20 per cent of its entertainment arm to boost profits.

Sony booked a small profit in the year to March 2013, after four years in the red, but that was largely due to asset sales and a decline in the yen which boosts exporters’ profitability. The unit has tumbled by about one-quarter against the dollar over the past year.

The firm invented the iconic Walkman but has struggled in recent years as the sector faced plunging TV sales while foreign rivals surged past them in the lucrative smartphone market.

Japanese digital camera makers have also suffered as consumers increasingly rely on smartphones to snap pictures.

“It seems like Sony is still searching for direction — things are going to be tough for a while,” Mitsushige Akino, analyst at Ichiyoshi Investment Management, said before the announcement.

“Japanese electronics firms have to carry out these restructurings quickly, including launching more competitive products, while the weak yen gives them breathing room,” he added.

 This week, Panasonic and Sharp said earnings improved thanks to an overhaul of their businesses and the yen’s decline, but weak sales of consumer gadgets held back the recovery.

The job losses at Sony’s TV and computer units — about 3.5 per cent of its global workforce — would see several hundred Vaio employees likely rehired by its new owner.

Sony added it will “explore opportunities” to transfer some employees to jobs within the company, which has about 145,800 employees, and offer others an “early retirement support programme”.