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Thursday, April 12, 2012
Sony Officially Announced Transformation Plan, Axes 10,000 Jobs

Sony said it is to cut around 10,000 jobs as new CEO Kazuo Hirai moves to reduce costs and huge losses at the Japanese electronics giant.

The company today announced a series of strategic initiatives to be introduced under the company's new management team established on April 1, 2012.

In short, Sony plans to strengthen its core businesses (Digital Imaging, Game, Mobile), turn around the television business, expand its business in emerging markets, create new businesses, realign its business portfolio and optimize the company's resources.

By implementing the above measures, Sony will target sales of 6 trillion yen and operating income margin of 5% in its electronics business, and sales of 8.5 trillion yen, operating income margin of more than 5%, and return on equity of 10% for the Sony Group overall, in the fiscal year ending March 31, 2015.

Sony is positioning digital imaging, game and mobile as the three main focus areas of its electronics business and plans to concentrate investment and technology development resources in these areas. By growing these three businesses, Sony aims to generate approximately 70% of total sales and 85% of operating income for the entire electronics business from these categories by FY14.

Sony plans to reinforce its development of image sensors, signal processing technologies, lenses and other key digital imaging technologies, and plans to leverage these technologies in both its consumer products (such as compact digital still cameras, digital video cameras and interchangeable lens digital cameras) and broadcast and professional products (such as professional use cameras and security cameras). The company also plans to extend the use of these key technologies across a wide range of business applications, from security to medical. Sony will target total sales of 1.5 trillion yen and double-digit operating income margin from the consumer, professional and image sensor businesses by FY14.

In the game business, Sony continues to deliver entertainment experiences through PlayStation 3, PlayStation Vita, and its combination of hardware, software, PlayStation Network, and range of accessories and peripherals. These will form the foundations on which Sony will target further sales and profit expansion in the game business. The company also aims to increase sales by enriching its catalog of downloadable game titles and subscription services available through the PSN platform, and also by expanding the lineup of PlayStation Suite compatible devices and content. Sony will target game business sales of one trillion yen and operating income margin of 8% by FY14.

In the area of mobile, Sony is integrating the R&D, design engineering, and sales and marketing operations of its smartphone business (operated by Sony Mobile Communications, now a wholly-owned subsidiary of Sony), "Sony Tablet" and "VAIO" businesses in order to quickly deliver new products to market. Sony also plans to aggressively leverage its many technologies in areas such as digital imaging and game, its rich content assets including pictures, music and game, its "Sony Entertainment Network" network service platform, as well as the communications technology expertise and knowhow, to launch new mobile products and establish new business models. Additionally, by integrating operations across its entire mobile product lineup, Sony aims to achieve further efficiencies and optimization. As a result of these measures, Sony will target sales of 1.8 trillion yen in FY14 from the mobile business, and significant profitability improvement.

Sony is already engaged in a television profitability improvement plan, which aims to return the television business to profitability in the fiscal year ending March 31, 2014, and intends to accelerate these measures going forward. The sale of Sony's share in its LCD panel manufacturing joint venture with Samsung Electronics has been completed, resulting in panel-related cost reductions. Additionally, Sony is taking further measures to change the business structure, for example by improving design engineering efficiency and reducing the number of product models (targeting a 40% reduction from the fiscal year ended March 31, 2012 to the fiscal year ending March 31, 2013), with the aim of reducing fixed business costs related to the television business by 60% and operating costs by 30% in FY13 compared to FY11.

Sony is additionally taking steps to enhance the image and audio quality of its "BRAVIA" range of LCD televisions that form the cornerstone of its current television lineup and to tailor its product offering to meet specific regional market needs. Going forward, Sony intends to advance the development and commercialization of next-generation display technologies such as OLED and "Crystal LED Display", as well as enhance the integration of televisions with Sony's mobile products, with content such as movies and music, and with other assets across the Sony Group to improve product competitiveness.

Sony will also continue to leverage its strong global operations and brand strength to drive sales growth in rapidly expanding emerging markets.

The company has already established strong foundations in emerging markets. Sony will continue to concentrate its sales and marketing resources in these markets, and expects to strengthen sales operations, introduce products tailored to local needs and leverage the Sony Group's entertainment assets, including pictures, music and television networks, to further enhance its market presence.

Sony generated 1.8 trillion yen through sales of electronics products in emerging markets in FY11, and aims to increase this figure to 2.6 trillion yen in FY14. The company will also aim for consumer AV/IT sales in emerging markets to represent 60% of total anticipated global sales of these products by FY14.

Sony will continue to aggressively promote innovation intended to deliver mid- to long-term growth, as well as the development of differentiating technologies that enhance core product value.

Specific examples of business areas in which Sony will target mid- to long-term growth are medical and 4K-related technologies.

Sony is a new entrant to the medical industry. In the medical peripherals business Sony has already successfully launched a range of medical printers, monitors, cameras, recorders and other medical-use products, and will target sales of 50 billion yen in this market in FY14. Sony also plans to enter the market for medical equipment components, where its strengths in various core digital imaging technologies offer significant competitive advantages in applications such as endoscopes. Furthermore, Sony plans to enter the life science industry, where the Company can leverage its expertise in technologies such as semiconductor lasers, image sensors and microfabrication. In the life science industry, Sony has acquired iCyt, a manufacturer of cellular analysis equipment, and Micronics, which manufactures medical and diagnostics equipment. Sony plans to continue to aggressively pursue other M&A opportunities to expand its medical business consistently with Sony's own strengths, with the aim of developing the business into a key pillar of Sony's overall business portfolio.

Sony is also drawing on its strengths in audio and visual technologies to aggressively promote the growth of "4K" technology, which delivers more than four times the resolution of Full HD. Incorporation of Sony-developed technologies, such as image sensors, image processing compression LSIs and high-speed optical transmission modules into its professional-use and high-end consumer products will pave the way for Sony to continue to expand and enrich its 4K-compatible product lineup.

Sony is accelerating its process of business selection and focus, and is concentrating its investments in core and new business areas. In terms of investment, core areas include the expansion of Sony's image sensor manufacturing capacity, capital investment in mobile products and aggressive strategic investment in development or M&A relating to new business areas such as medical. Other existing business areas will be evaluated so that Sony can determine the optimum strategy for these businesses.

For example, in the small- and medium-sized display business and chemical products business, Sony has already transferred or is in negotiations to transfer those businesses to external parties. Furthermore, Sony is also exploring possible alliances in the area of batteries for electronic vehicles and energy storage modules.

In addition to this business portfolio realignment, as Sony moves to strengthen its core businesses and shift resources to growth areas, it will also restructure its headquarters, subsidiaries and sales company organizations in order to further enhance operational efficiencies. As a result of these measures, Sony estimates that the headcount across the entire Sony Group will be reduced by approximately 10,000 in FY12. This includes employees expected to transfer outside the Sony Group as part of the sale of businesses and other realignments resulting from business portfolio optimization. Sony anticipates that many of these businesses will have future growth opportunities outside the Sony Group, and Sony will consider various measures to secure continuity of employment for employees at their new destinations. Sony is projecting restructuring costs of 75 billion yen in FY12.

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