Sony Cuts 5,000 Jobs as it Exits the Computer Business

Sony will cut 5,000 jobs, spin off its TV division and exit the computer business completely in a wide-ranging restructuring plan which is seeking to streamline the company.

Sony is a giant of the technology industry but with fingers in many pies (audio, video, camera, smartphone, TV, gaming, music, television, film) it was always an unwieldy beast to manage, and under the management of CEO Kaz Hirai the company is now looking to streamline its operations after the company revised its profit outlook for the current year.

Having previously said it would return to profit in the current financial year, which will end on 31 March 2014, the company is now predicting a loss of 110 billion yen (£600 million, €725m).

The company originally predicted a profit of 50bn yen, but that was cut to 30bn yen in October.

Restructuring costs

The reason for the change is not a drop in predicted revenue however but down to depreciation, amortisation and the costs of the wide-ranging restructuring plans which Hirai has put in place.

The company will lay off 5,000 employees globally by the end of the 2014 financial year, 1,500 of those in Japan. As of 31 March last year Sony had 146,300 employees, though that figure was down more than 16,000 from the year before following deep cuts made by in 2012, under Hirai's One Sony plan.

Sony will also "cease planning, design and development of PC products," selling the business to Japanese investment fund Japan Industrial Partners, who will hire between 250 and 300 Sony staff to help continue sell Vaio-branded computers in Japan.

Concentrate on mobile

The reason for the sale at this point? "Drastic changes in the global PC industry," according to Sony, who claim the move will allow them to "concentrate its mobile product lineup on smartphones and tablets."

The Sony Vaio (which has alternately stood for 'Video Audio Integrated Operation and 'Visual Audio Intelligent Organizer') brand was introduced in 1996 with the PCV desktop line, and in the last 18 years the computers have become one of the world's most recognisable laptop brands.

However it is an indication of the way the PC market has gone that Sony feels there is no future in it. The PC market has been in consistent decline for the last two years and that decline is expected to continue well in to 2014, as the world moves from desktops and laptops to smartphones and tablets.

Smartphone success

And this is where Sony will be focusing its attention from now on. In its latest financial results Sony recorded a 45% increase in it mobile products division - which until now included laptops. This suggests that the growth in smartphone and tablet sales may have been much bigger, considering the industry-wide drop in laptop sales.

Since Sony ended its partnership with Ericsson in 2011 and moved it smartphone division back into the centre of the company, it has seen significant success with devices like the Xperia Z and its successor the Xperia Z1.

Sony also announced that it was spinning off its TV business to a subsidiary which will be wholly owned by Sony. Sony's home entertainment and sound division saw a 24% increase in revenue in the final three months of 2013 thanks to improved LCD sales, but the decision to spin off the TV division and focus only on the high end, shows that the TV business as a whole is not a big profit driver.

PS4

Finally, the most positive note from Sony's financials was the success of its gaming division, which saw a 66% increase year-on-year thanks to the success of the PlayStation 4, with Sony selling more than 4 million units in the four weeks to the end of 2014.