Sony plans massive job cuts

Consumer demand has been falling

Japanese electronics giant Sony is planning to cut 20,000 jobs - 13% of its global workforce - over three years as part of a massive restructuring designed to see off its rampant rivals.

The cost of the three-year plan to deal with sliding profits will be about 335bn yen ($3.1bn; £1.8bn), a tenth higher than previously estimated.

The company slid into a shock loss in the first three months of the year, and profits have been sluggish ever since.

At the same time, Sony announced a joint venture on flat-screen TVs worth almost $2bn with South Korean competitor Samsung, to be formed in South Korea early next year.

Chairman Idei is not just talking the talk but he is walking the walk John Yang, Standard & Poors How did Sony lose its way?

The deal would secure supplies of the product for Sony in a sector in which it has fallen behind its rivals, having concentrated on more expensive - and less popular - plasma screens.

Analysts say the partnership could well tip the balance in favour of liquid crystal display (LCD) panels over plasma for large screens.

Sony has also lost ground to Matsushita Electrical Industrial Co in DVD recorders.

Matsushita - which makes the Panasonic brand - reported a 73% rise in profits in the second fiscal quarter, while Sony's profits slumped by 25% in the period from July to September.

First steps

Of the job cuts about a third - or 7,000 posts - will be lost at home. No breakdown of where else in the world the axe would fall was immediately available.

No job cuts will be made in South Wales, where 2,400 workers are employed in two plants, the company said.

The rapid rise in the value of the yen, from 120 to the dollar earlier this year to close to 108 now, has also cut into its performance by making its Japan-sourced products more expensive overseas.

Aside from the core electronics business, Sony's financial services activities are in line for a shakeup too, and will be split off into a separate company next year with a possible flotation later.

Analysts said the restructuring plans needed to go further, but greeted them as a good start.

"Actually, I'm taking all of this as a very positive step," said John Yang, equity analyst at Standard & Poor's in Tokyo.

"It's true that they need more drastic steps, but what's important here is that... Chairman Idei is not just talking the talk but he is walking the walk."