Sony's first loss in 14 years will be further job

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Sony Corp. Said it would report an annual loss for the first time in 14 years as plunging LCD television prices and a strong yen are forcing Chief Executive Howard Stringer to pursue his most drastic restructuring measures to date, more than doubling the cost cuts that were announced in December.
Crippled by a global economic downturn and intensifying price competition, Sony said it now expects to post a net loss of 150 billion yen ($ 1.7 billion) in the fiscal year ending March 31, a reversal from a 150 - billion-yen profit forecast that was made in October. It also cut its sales forecast by 14% to 7.7 trillion yen.
Mr. Stringer, who took over in 2005 as the first non-Japanese executive leading the electronics and entertainment conglomerate , said Sony has to accelerate its restructuring plans with a sense of urgency to reduce fixed costs that are too bloated and a supply chain that is too slow.
Last month, Sony said it would cut 16,000 jobs from its electronics divisions and close as many as six factories in an attempt to save more than 100 billion yen in annual costs.
Now, it plans to expand the layoffs to other businesses [link widoczny dla zalogowanych], including its entertainment and videogame arm, and slash spending across the board to shave an additional 150 billion yen in costs.
Sony didn't specify the number of new layoffs, but said it plans to close a television factory in Japan by June and it will outsource more production of lower-cost products to contract manufacturers [link widoczny dla zalogowanych], a strategy used by competitors. The company didn't offer further details of how it would achieve the cost savings.
In many ways, Sony's competition with Apple Inc. captures the challenges facing the company. Apple came to dominate the market that Sony's Walkman created not with hardware brilliance or manufacturing prowess but with simple-to-use software and elegant design. On Wednesday Apple reported net profit rose 1.5% in the fiscal quarter ended Dec.27.
Apple relies on contract manufacturers for production and doesn't have any factories of its own. By comparison, Sony has 57 electronics factories. Half are in Japan where labor costs can be high and a strong yen can cripple profit margins when funds from products sold overseas are repatriated into yen. More than 80% of Sony's electronics are sold overseas. Earlier in the week, the yen hit a new 13-year high against the US dollar at 87.10.
Many Japanese companies consider it a social responsibility to care for their workers and prefer to make cutting full-time jobs at home a last resort. A third of Sony's 180,000 full-time employees are based in Japan.
Sony forecast an operating loss of 260 billion yen, the company's biggest to date, compared with a previous estimate for an operating profit of 200 billion yen.
Preliminary results for the fiscal third quarter ended Dec. 31 show sales fell 25% from a year earlier to 2.1 trillion yen, while net profit fell 95% to 10 billion yen. Historically, Sony earns a larger portion of its full-year profit during the holiday quarter.
In the past three years, the 66-year-old Mr. Stringer has shed 10 [link widoczny dla zalogowanych],000 jobs at the company, separate from the 16,000 job cuts announced in December , mostly from Sony's non-Japanese staff.
But while those efforts were starting to pay off with improved profitability, Sony was hit with a double whammy of a severe economic slowdown in its key markets and a strong yen.
Now , Mr. Stringer is pushing to make the deep and painful cuts in Japan that he hasn't made in earlier restructuring plans, using the economic downturn as the catalyst to take more drastic measures, according to a person familiar with the matter.
Analysts, meanwhile, said the lack of detail about Sony's restructuring efforts raises questions about whether the company's plans are sufficient.
The company tripled its forecast for restructuring charges for this fiscal year to 60 billion yen and said it would incur an additional 110 billion yen in restructuring charges next year.
Daisuke Wakabayashi