The disintegration of one of the world’s great consumer electronics companies continued as Sony Corp. (NYSE: SNE) sold one of its core operations — PCs — and fired 5,000 people. The Japanese public corporation will turn its attention to smartphones, another sector in which it has done poorly.
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.
JIP stands for Japan Industrial Partners Inc.
Sony reported it would also restructure part of its TV business, which will be another contribution to layoffs:
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.
As a whole, all of these decisions will cause Sony to have an annual loss of 110 billion yen, or approximately $1.1 billion. As it changed its forecast, Sony reported numbers for its fiscal third quarter:
Sales and operating revenue (“sales”) were 2,412.8 billion yen (22,979 million U.S. dollars), an increase of 23.9% compared to the same period of the previous fiscal year (“year-on-year”). This increase was primarily due to the favorable impact of foreign exchange rates, the launch of the PlayStation 4, as well as a significant increase in sales of smartphones. On a constant currency basis, sales increased 5% year-on-year. Operating income increased 43.9 billion yen year-on-year to 90.3 billion yen (860 million U.S. dollars). This increase was primarily due to the favorable impact of foreign exchange rates, a significant improvement in the operating results of the Home Entertainment and Sound (“HE&S”) segment reflecting a decrease in loss in Televisions, a significant increase in operating income in th e Game segment reflecting the launch of the PS4, and a significant increase in operating income in the Financial Services segment. The current quarter’s results include a 32.1 billion yen (306 million U.S. dollars) impairment charge related to long-lived assets in the battery business in the Devices segment, an 8.2 billion yen (78 million U.S. dollars) impairment charge for long-lived assets in the PC business in the Mobile Products & Communications (“MP &C”) segment and a 6.2 billion yen (59 million U.S. dollars) write-off of certain PC software titles in the Game segment.