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Sony to cut 8,000 jobs, slash $1.1 bln in costs

TOKYO - Japan’s Sony Corp said it will cut about 4 percent of its workforce, curb investment and pull out of businesses to save $1.1 billion a year, as the financial crisis ravages demand for its electronics products.

The 8,000 job cuts are the biggest announced by an Asian firm so far in the crisis and underscore the challenges facing Sony, which has fallen behind Apple Inc’s iPod in portable music and is losing money on flat TVs.

But analysts warned the measures may not be bold enough to streamline a sprawling empire that ranges from semiconductors to movies and insurance. The cuts are also risky because they mean Sony will be investing less in future growth.

“The number sounds big, but this staff reduction won’t be enough. Sony doesn’t have any core businesses that generate stable profits,” said Katsuhiko Mori, a fund manager at Daiwa SB Investments.

“After the workforce reduction, the next thing we want to see is what is going to be the business that will drive the company.”

Sony is not the only one suffering. Japanese rival Panasonic lowered its earnings forecasts last month while South Korea’s Samsung Electronics Co said Monday it would cut capital investment and warned of tough times.

Shares in Sony, which have fallen nearly 70 percent this year, rose 3 percent to 15.79 euros in Frankfurt after the announcement.

Sony flagged the need for restructuring in October when it more than halved its annual profit forecast, blaming slowing demand for its Bravia liquid crystal display TVs and Cyber-shot digital cameras and a firmer yen.

The restructuring is a setback for Chief Executive Howard Stringer, who had implemented a major restructuring after taking the helm in 2005 and until recently seemed to have put the company on a recovery track.

It also underlines the grim outlook for Sony and its rivals during the year-end shopping season as the financial crisis grows into a broad recession that has already engulfed the United States, parts of Europe and Japan..

Currency impact

Sony, along with other Japanese exporters, has also been hit hard by a surging yen, with the currency’s rise to 13 year highs in recent months cutting into the value of its profits and making its products less competitive in overseas markets.

South Korean competitors Samsung and LG Electronics have found some relief in the weaker won.

Both companies have adjusted production to cope with falling orders and say they do not plan to cut staff, but analysts are not so sure.

“Japanese electronics makers suffer more than their rivals in South Korea because of the stronger yen,” said Lee Min-hee, an analyst at Dongbu Securities in Seoul. “But going forward Korean manufacturers could consider more drastic measures.”

Sony said it would delay boosting output for LCD TVs in Slovakia and outsource production of image sensor chips used in mobile phones, as it aims to cut electronics investment by 30 percent in the next business year compared with a prior plan.

It also unveiled plans to reduce the number of manufacturing sites by 10 percent by consolidating factories in low-cost areas and contracting out production. The measures will include closing a videotape plant in France.

Sony, which employs about 186,000 people worldwide, said it would also cut 8,000 seasonal and temporary workers.

The company said it would detail the effect of the restructuring on earnings at its third-quarter results in January.

Hiroaki Osakabe, fund manager at Chibagin Asset Management, said the steps would not likely sustain a rally in Sony shares.

“The scheme doesn’t contain anything new, like a new earnings pillar or a growth strategy. It was something that people had expected, and I think the market had already discounted the announcement,” he said.