TIDMSON
Sony Corporation1-7-1 KonanMinato-ku, Tokyo
No. 14-019EFebruary 6, 2014
Sony Announces Plans to Address Reform of PC and TV
Businesses
Sony to sell PC business and concentrate mobile business on
smartphones and tablets
Sony to accelerate shift to high-end models and transition to a
more efficient and dynamic structure in the TV business
Sony Corporation ("Sony" or "the Company") today announced
significant new measures to address reform of its PC and TV
businesses aimed at accelerating the revitalization and growth of
its electronics business.
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, Sony has made significant progress in
executing this strategy. Sony has launched high value-added
products that bring together the best of Sony's technological
strengths and introduced new market-leading platforms and business
models. 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 ("FY13").
As a result of the circumstances described above, Sony 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 Inc. ("JIP") today 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, the Company 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. 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 Japanese market and seek to optimize its sales channels and
scale of operations, while evaluating possible further geographic
expansion.
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 to 300 Sony Corporation and Sony EMCS
Corporation 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 Corporation 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.
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 147.5 billion yen* in the fiscal year
ended March 31, 2012 (FY11), were successfully reduced to 69.6
billion yen in FY12, and are now anticipated to be reduced further,
to approximately 25 billion yen in FY13.
*Not including 64.1 billion yen equity in net losses of
affiliates from the S-LCD joint venture.
While Sony now anticipates that its target of returning the TV
business to profitability will not be achieved within FY13 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 4K, 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 4K models (during calendar year 2013, based on
revenue). TVs continue to play a vital role as the centerpiece of
the home viewing experience. Sony aims to leverage the wealth of
technological expertise and assets accumulated within this business
as key differentiation technologies across its entire product
lineup. In light of the TV business' continued importance within
Sony's overall strategy, the Company has decided to execute the
additional reform measures detailed below, with the aim of
establishing a structure capable of delivering stable profit
beginning in the fiscal year ending March 31, 2015 ("FY14").
First, Sony will shift its product mix and focus on increasing
the proportion of sales from high-end models in FY14. Sony plans to
reinforce the company's leading position in the 4K 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 (as
outlined below). In addition, to help transform this 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 FY14.
Manufacturing, Sales, Headquarters/Indirect functions
In view of these strategic decisions about the PC and TV
businesses, and the increasingly aggressive process of selection
and focus being implemented across Sony's electronics business, the
Company plans to optimize the scale of the manufacturing, sales,
and headquarters/indirect functions that support these
businesses.
In terms of electronics sales companies, Sony plans to identify
focused product categories for each specific country and region,
rationalize support functions, and proactively implement
outsourcing and other efficiency measures with the objective of
achieving total cost reductions of approximately 20%** by the
fiscal year ending March 31, 2016 ("FY15").
With respect to manufacturing sites, Sony will proceed with the
further optimization of manufacturing and other operations.
Sony will also streamline Sony Corporation headquarters and
support functions and expects to achieve cost reductions of
approximately 30%** by FY15 within these operations.
**Compared to FY13.
Anticipated Costs and Benefits of Headcount
Optimization/Restructuring
Due to the implementation of the above measures across Sony's TV
and PC businesses, and its manufacturing, sales and
headquarters/indirect functions, Sony is anticipating headcount
reduction of approximately 5,000 (1,500 in Japan, 3,500 overseas)
by the end of FY14.
In order to execute these measures, Sony is allocating an
additional 20 billion yen (approximate)*** in restructuring
expenses in FY13 and a further 70 billion yen (approximate) in
restructuring expenses in FY14. Sony expects these measures to
result in annual fixed cost reductions of more than 100 billion yen
(approximate) starting in FY15.
***Total restructuring expenses in FY13 are expected to be 70
billion yen (approximate) including 50 billion yen (approximate)
originally allocated.
In addition to all of the above measures, Sony will also be
accelerating its process of business portfolio realignment, and
refining its R&D project selection process across its
electronics businesses.
Cautionary Statement
Statements made in this release with respect to Sony's current
plans, estimates, strategies and beliefs and other statements that
are not historical facts are forward-looking statements about the
future performance of Sony. Forward-looking statements include, but
are not limited to, those statements using words such as "believe,"
"expect," "plans," "strategy," "prospects," "forecast," "estimate,"
"project," "anticipate," "aim," "intend," "seek," "may," "might,"
"could" or "should," and words of similar meaning in connection
with a discussion of future operations, financial performance,
events or conditions. From time to time, oral or written
forward-looking statements may also be included in other materials
released to the public. These statements are based on management's
assumptions, judgments and beliefs in light of the information
currently available to it. Sony cautions investors that a number of
important risks and uncertainties could cause actual results to
differ materially from those discussed in the forward-looking
statements, and therefore investors should not place undue reliance
on them. Investors also should not rely on any obligation of Sony
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Sony
disclaims any such obligation. Risks and uncertainties that might
affect Sony include, but are not limited to:
(i) the global economic environment in which Sony operates and
the economic conditions in Sony's markets, particularly levels of
consumer spending;
(ii) foreign exchange rates, particularly between the yen and
the U.S. dollar, the euro and other currencies in which Sony makes
significant sales and incurs production costs, or in which Sony's
assets and liabilities are denominated;
(iii) Sony's ability to continue to design and develop and win
acceptance of, as well as achieve sufficient cost reductions for,
its products and services, including televisions, game platforms
and smartphones, which are offered in highly competitive markets
characterized by severe price competition and continual new product
and service introductions, rapid development in technology and
subjective and changing consumer preferences;
(iv) Sony's ability and timing to recoup large-scale investments
required for technology development and production capacity;
(v) Sony's ability to implement successful business
restructuring and transformation efforts under changing market
conditions;
(vi) Sony's ability to implement successful hardware, software,
and content integration strategies for all segments excluding the
Financial Services segment, and to develop and implement successful
sales and distribution strategies in light of the Internet and
other technological developments;
(vii) Sony's continued ability to devote sufficient resources to
research and development and, with respect to capital expenditures,
to prioritize investments correctly (particularly in the
electronics businesses);
(viii) Sony's ability to maintain product quality;
(ix) the effectiveness of Sony's strategies and their execution,
including but not limited to the success of Sony's acquisitions,
joint ventures and other strategic investments;
(x) significant volatility and disruption in the global
financial markets or a ratings downgrade;
(xi) Sony's ability to forecast demands, manage timely
procurement and control inventories;
(xii) the outcome of pending and/or future legal and/or
regulatory proceedings;
(xiii) shifts in customer demand for financial services such as
life insurance and Sony's ability to conduct successful asset
liability management in the Financial Services segment;
(xiv) the impact of unfavorable conditions or developments
(including market fluctuations or volatility) in the Japanese
equity markets on the revenue and operating income of the Financial
Services segment; and
(xv) risks related to catastrophic disasters or similar events.
Risks and uncertainties also include the impact of any future
events with material adverse impact.
This information is provided by Business Wire
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