Sony overhauls ahead of sixth annual loss – will it be enough?
Japanese electronics firm Sony is undergoing further restructuring and job cuts as the company continues to bleed red in its annual finances
Optimistic? Sony's CEO Kazuo Hirai has set an ambitious target for the company. He hopes that with restructuring, Sony will be able to increase its operating profit threefold by 2016
Electronics-giant Sony is in for a massive overhaul according to its Chief Executive Kazuo Hirai, who has unveiled an ambitious target to increase the company’s operating profit by threefold by 2016. Hirai vowed to complete large-scale restructuring measures in order to turn around Sony’s troubled consumer electronics arm.
This follows the firm’s expectations of a $500m annual net loss, down from the $1.3bn loss recorded in 2013
At a strategy briefing Hirai said that the firm is selling its Vaio computer brand, spinning off parts of its TV business and boosting core areas such as games, imaging technology and mobile devices. Nevertheless, Sony is heading towards its sixth annual loss in seven years, with restructuring costs mounting despite being set to cut 5,000 jobs.
The promises are similar to those of two years ago, which saw a restructuring involving the sale of its PC business and cost cuts in its sales and headquarters divisions.
“We will finish off the restructuring of the electronics business, and we will not put off the reforms,” Hirai explained to investors in Tokyo.
Combined with stable profits from its entertainment and financial businesses, Hirai said he was confident in the firm achieving a turnaround as cost savings would enable Sony to achieve an operating profit of ¥400bn ($3.95bn) for the year through March 2016, compared with a profit of ¥140bn forecast for the current year. This follows the firm’s expectations of a $500m annual net loss, down from the $1.3bn loss recorded in 2013.
In a surprising move, Sony did not provide any longer-term revenue or profit targets for the next three years. This follows heavy criticism from investors after the firm in previous years failed to deliver on its bullish goal forecasts. During the previous fiscal year alone, Sony cut its earnings guidance three times and its latest revenue target is 8.2 percent below what Hirai pledged two years ago.
“Unless we produce the results, I don’t believe we can draw up our medium to long-term strategies,” he said.
Despite Sony’s TV business racking up major losses, Hirai pledged he would turn around the TV arm, which to a large extent was responsible for Sony’s ascendance in the electronics industry in the 1990s. Sony will also be looking into new businesses like wearable technology, batteries and medical equipment.
