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• Technology news: Sony slashes

  
  16 December 2008
  

  From the people who brought you the PlayStation3 console comes RestructuringPlan2. But while gaming geeks were gagging for the former, investors should manage to contain their excitement for the latter. Sony Corp, the Japanese consumer electronics group that is forecasting a 59 per cent slide in net profits this year, is to cut 8,000 jobs, or 5 per cent of its electronics workforce, and trim investment in the sector next fiscal year. One in 10 of its 57 manufacturing sites will be shuttered.

  There are two problems. First, Sony’s profit forecast, revised in late October, looks more Pollyannaish now than it did then. Those numbers were based on a second-half exchange rate of Y100/$1, a level of weakness not seen since. Second, the response focusing purely on cost-cutting in a single division is tame. Whittling back workers and factories will save over $1bn a year, Sony reckons, or half as much operating profit as it expects to make this year. There is no guidance on the cost of restructuring, likely to be considerable given the inevitable redundancy payments for 8,000 targeted electronics workers. It could easily swallow up one year of savings if the first restructuring plan implemented under Sir Howard Stringer is any guide. That plan, which resulted in 10,000 job losses (on presumably richer terms than would be available today) and 11 factory closures, cost more than $2bn.

  Sony is not even trying to tickle consumer demand by, for example, cutting the price of games consoles. On the contrary, it plans to raise the price of gadgets in Europe to help recoup currency losses. That will surely make the price tags on Samsung screens – flattered by the weak South Korean won – more compelling viewing for Europeans, and further dent Sony’s top line. With white-collar workers losing their jobs in droves, demand for flat-screen TVs and other gadgets is already shrivelling. Add in appreciation, and electronics sales could easily drop 10 per cent. Roll on RestructuringPlan3.

   

  (ft.com)