Sony announced today that it will cut 5,000 jobs, sell off its Vaio personal computers, and spin off its television division in order to stem the massive $1.1 billion loss it expects this year, instead of the anticipated profit it announced in October.
The company, which has been suffering losses for about a decade, said the jobs will be eliminated by March of 2015, and that it expects to reach $988 million a year in savings by 2015-2016. According to Los Angeles Times, Sony -- the third largest television maker in the world -- had been suffering from stalling TV sales for some time:
Sony’s share of global TV revenue fell to 7.5 percent in the third quarter last year from 8.1 percent the previous quarter, according to NPD DisplaySearch. Sony ranked third, trailing Samsung and LG. “There’s no prospect of its TV business being profitable,” said Makoto Kikuchi, the Tokyo-based chief executive officer for Myojo Asset Management Co. “Sony’s strengths are content such as games and movies. It cannot increase profit without moving its focus from TV production to content.”
But that doesn't mean Sony is giving up on television. Sony's subsidiary television business will focus on expensive television sets, like the high-definition 4k ultra TVs that Sony CEO Kaz Hirai says boosted business last month. And during last month's Consumer Electronics Show, Hirai talked about introducing a TV streaming service and wearable television sets, the ultimate couch potato technology. Still, the company failed to end TV losses this year, as it had said it would, and will now focus on other gadgets like smartphones, gaming consoles, and imaging products.
Sony's decision to shed its personal computers could be symbolic, as well as tactical, per The New York Times:
Sony’s PC business, which makes notebooks and other computers under the Vaio brand name, has become a symbol of the company’s inability to keep pace with American, South Korean and Chinese rivals in consumer electronics. The company that invented the Walkman has struggled in the era of the smartphone, losing its reputation for innovation to companies like Apple and its leadership in manufacturing to new powerhouses, including Samsung and Lenovo.
One bright spot for Sony, however, is its Playstation 4 gaming console. The company has sold more than 4.2 million units since November, outpacing competitors Microsoft and Nintendo.
Still, the company is in store for a rough ride, even though it attributed the unexpected losses to restructuring costs. This is the fourth major restructuring for Sony, whose credit rating was slashed last month because of its failure to resuscitate its PC and television divisions. Unless they start selling us cheap wearable televisions that stream shows and movies and somehow feed us popcorn, in which case we think they'll do just fine.
This article is from the archive of our partner The Wire.