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By | Paul Kunert 6th February 2014 11:29

Sony set to axe 5,000 workers worldwide as it flings PC biz overboard

Equity firm JIP takes on VAIO unit, restricts sales to Japan

Stumbling consumer electronics giant Sony has confirmed it will axe 5,000 workers worldwide and offload its loss-making PC business to private equity firm Japan Industrial Partners (JIP).

The ailing Japanese corporate revealed the restructure as it forecast a ¥110bn loss (£665m) for the current financial year ending March compared to the ¥30bn profit previously estimated.

"Sony is anticipating headcount reduction of approximately 5,000 (1,500 in Japan, 3,500 overseas) by the end of financial year '14," it revealed.

"Definitive agreements" between Sony and JIP are expected to conclude by the end of next month, paving the way for a ¥50bn completion by 1 July.

The firm said it analysed numerous factors including the "drastic changes in the global PC industry", the overall product portfolio, and the need to continue to provide support to VAIO customers before deciding to get rid of its PC biz.

"Sony determined that the optimal solution is to concentrate its mobile product lineup on smartphones and tablets and to transfer its PC business to a new company established by JIP," it stated.

Under the terms of the deal, JIP will run the unit as an independent business including planning, design, development, manufacturing and sales. Sony will invest five per cent of the new firm's capital to support its launch, but will not produce PCs past the spring.

After reviewing the portfolio, JIP decided to "initially concentrate" on sales of retail and commercial PCs in the Japanese market and "seek to optimise its sales channels and scale of operations".

From this base, the equity firm hopes to "quickly secure stable profit" but will "evaluate" further geographic expansion beyond that.

The new PC firm's HQ will remain at the Nagano Technology Site, which is already the hub for PC-related operations

The sale of the PC unit is hardly surprising. Sony did not have the economies of scale to compete on a global stage, and, with the premium-priced VAIO line, it has remained a bit part player in a declining sector.

According to Gartner, Sony had 1.9 per cent share of PC shipments in 2013, placing it as the ninth biggest box shifter worldwide. In notebooks alone it held 3.2 per cent, again placing it in ninth.

In the UK during the last quarter, Sony shipments slipped 8.5 per cent in the consumer segment , and it was non-existent in the business market.

The biz overhaul comes as Sony reported a profit of ¥27bn for the third quarter running from October to December, versus a loss of ¥10.8bn a year earlier.

But the Mobile and Comms unit, which houses PCs, reported a loss of ¥12.6bn, albeit better than the ¥21.3bn in the corresponding quarter a year ago. The unit took an impairment charge of ¥8.2bn to write down "long lived assets on the PC business", said Sony.

The Home Entertainment and Sound unit, which includes TVs, made a profit of ¥6.4bn compared to a loss of ¥8bn a year ago, but Sony will continue with the reforms programme first initiated in 2012. It no longer expects to return the TV biz to profit in fiscal '14, which ends next month.

The aim is to eke out cost cuts of 20 per cent by the end of fiscal '16 by streamlining the scale of manufacturing, sales and HQ functions that support both the TV unit and what will remain of the Mobile and Comms biz. ®

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