Sony announces restructuring, $2.9 billion loss

[UPDATE 2] PlayStation 3 maker says it will cut TV division by 30% worldwide as operating margins plummet; game losses to increase $338 million.

That Sony will be cutting a significant portion of its workforce is a certainty. The Japanese electronics giant announced the move in December, saying that it would eliminate approximately 16,000 part- and full-time jobs in a bid to save $1.1 billion through its next financial year, which ends March 31, 2010.

Sir Howard Stringer, with Sony's upper echelon.

However, what remains to be seen is which divisions these reportedly "sweeping" and "sacred-cow-slaying" cuts will impact. The Financial Times reports today that Sony plans to announce the specifics of its restructuring efforts sometime this week.

As previously revealed, CEO Sir Howard Stringer has faced stiff resistance from entrenched Sony management, who oppose the company's first British-born executive's plan. The FT notes that Stringer believes the stalwart electronics company should shift its focus toward the software market, whereas dissidents maintain the value of its hardware-creation business. Another reported cause for tension between Stringer and upper management is his belief that Japanese staff should be subject to head-count reductions.

Japanese financial news service Nikkei (subscription required) corroborates the FT's report. Nikkei notes that Sony will announce on Thursday that it plans to close one of its two television-manufacturing facilities in Japan by the end of its current fiscal year, which runs through March 31. Along with the factory closure, Sony will reportedly announce that it plans to cut more than 2,000 jobs in Japan, as well as lower its fiscal-year earnings outlook. However, as with Microsoft's reported cost-cutting measures, Sony will eliminate the 2,000 jobs by way of natural attrition, or employees leaving the company of their own accord, according to Nikkei.

The Japanese factory wouldn't be the first that Sony plans to shut down. After Sony's restructuring announcement in December, Pennsylvania governor Ed Rendell confirmed that Sony's flat-screen television-manufacturing facility located in his state will close, leaving approximately 560 employees out of work. In total, Sony said that it plans to close 10 percent of its 57 manufacturing facilities.

Sony's cost-cutting measures have been spurred by the PlayStation 3 maker's grim fiscal outlook. Earlier this month, Nikkei reported that Sony will post its first loss since 1995, only its second since the company went public in 1958. Sources told the Japanese news service that Sony's net losses for the current fiscal year will hit ¥100 billion ($1.1 billion), a figure that could double depending on the electronics company's January-March retail performance.

[UPDATE] As expected, Sony's restructuring announcement has come to pass. The electronics company today confirmed much of Nikkei's initial report, saying that it will close one of its TV-manufacturing facilities in Japan, as well as reduce its global headcount across the division by 30 percent during its next fiscal year, ending March 31, 2010.

In a further effort to cut costs, Sony said it would be substantially reducing executive bonuses for the current fiscal year, introduce an early retirement plan, and outsource more of its software development. In all, the publisher expects its cost-cutting measures to amount to a savings of ¥250 billion ($2.8 billion) by the end of its next fiscal year, more than doubling the target it set out in December.

Along with the restructuring announcement, Sony drastically lowered its current fiscal-year earnings forecast. Coming in significantly lower than already dismal projections, the company said it now plans to post a ¥260 billion ($2.9 billion) operating loss for the year ending March 31, 2009. Previously, Sony had expected to make a ¥200 billion ($2.2 billion) profit for the year. For the year, Sony now expects to post a ¥150 billion ($1.7 billion) net loss on ¥7.7 trillion ($86.5 billion) in revenue.

[UPDATE 2] In addition to providing a company wide earnings revision, Sony also broke out its expected results for its PlayStation-led computer entertainment division. Not surprising considering the PlayStation 3's third-place finish in the 2008 console race, Sony revealed that its games segment will increase its losses by approximately ¥30 billion ($338 million) for the fiscal year. Of that figure, Sony attributed ¥15 billion ($169 million) to lower-than-expected sales, with the remaining half due to an appreciation of the yen.

Following its earnings revision announcement, the Japanese company discussed its move with analysts and investors. While the bulk of the conversation dealt with the aforementioned turmoil in its electronics division, Sony did offer up a few tantalizing clues on the future of its PlayStation brand.

After bemoaning the company's slowness to market in certain areas, Stringer commented that it is vitally important for Sony "to advance a number of our strategic priorities." One of those priorities could be the company's PlayStation-branded handheld, with Stringer noting, "We will tap our unique strengths in gaming, entertainment, digital imaging and telephony to fast track a lineup of next generation mobile devices."

Stringer also indicated that the company plans to more deeply integrate its television and computer entertainment products. "First, we will accelerate the transition of our televisions from being passive displays offering linear entertainment chosen by conventional gatekeepers to becoming network entertainment centers providing rich content alternatives organized by consumers [based] and called directly from the broadest and most open network in the world, the Internet," the executive said.

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Discussion

551 comments
TheArcade
TheArcade

How much money has Sony lost on the PS3 total?

brendanhunt1
brendanhunt1

Why would sony stop making game consoles just because one generation is failing,the original xbox did badly

brendanhunt1
brendanhunt1

@frazzle00 in the early 1990s there was realy lack of sales of vedio games, people were starting to get bored and wanted somthing new. This is a true event research it

xdeiri
xdeiri

thumb up if you think yuck too is high

Yuck_Too
Yuck_Too

What amazes me are the comments saying this is because of the recession and it's all Bush's fault. Bush was a poor President...but he got the nomination over McCain to start, then Americans elected him over Gore the first time and then Bush over Kerry the second time. Got no one to blame but yourselves there. As for the current recession, the rules and changes that directly lead to the mess were put into places over the previous 2 administrations prior to Bush. In fact Bush tried to have the legislation changed twice over his 8-years and both times the Senate shot it down. The entire problem is the overall American attitude, their failure to understand and their quickness to blame. Sony has had a similar elitist attitude, and that is the core problem.

xdeiri
xdeiri

ok thumb up if you want sony out

Shadowflame291
Shadowflame291

@kejigoto Wow, I thought I was the only person who knows about the Apple Pippin. There must be like 50,00-100,000 people who know what it is.

Superman1938
Superman1938

The whole world is hurting because Bush focused all of his attention at the middle east instead of focusing where it matters, right here. People warned this was coming, he just didn't listen. Now my poor flight simulator XI may never come out :(

msudude211
msudude211

Wow - today's news is all about cuts, losses, and stocks dropping. :(

everettseanw
everettseanw

Because, on the recession, If the recession is over, sony will get there jobs back. 80gb PlayStation 3 is going down to to $300

kejigoto
kejigoto

@ xdeiri Worst idea ever. Apple tried before and failed miserably and Samsung I wouldn't put much stock that they could truly hang with the likes Sony, Microsoft, or Nintendo.

xdeiri
xdeiri

thumb up if you want samsung or apple to inter gaming world

remark666
remark666

gj Kremmin. exactly what i had on my mind Krammin Posted Jan 23, 2009 11:26 pm PT People saying that the PS3 is a failure because of this news really need to get in touch with whats going on globally... This global economical crisis is hitting every major business globally... including MS who in it's 34 years of running had to cut 5000 jobs for the first time. This is bigger than PS3 vs XBOX, it's corporate greed at its best bringing down major corporations and causing millions of job losses around the world. People aren't spending because they are scared to due to the "recession" therefore, company's fire people to retain profit, and so on and so on and so on. Sony took a gamble with the PS3 which to me is the superior console (flame me as much as you want) BUT because of it being the superior console due to Blu-Ray capabilities, the cost of the console is more - the general public would rather spend less therefore, Xbox and Wii are doing amazingly. Either way people, there will always be technology out there to keep gamers satisfied, be it Sony, MS, Nintendo or whoever. So while the world crumbles, you can be in your lounge room tinkering away. and to add to that, I think Sony's gonna get serious this year, good year to own a ps3 =)

Shadowflame291
Shadowflame291

I seriously doubt Sony is going to stop making consoles because of losing one generation. Look at Nintendo. They got their asses handed to them by Sony 2 generations in a row. And now, they're on top again!! My point is, anything can happen. Maybe the PS3 will make a comeback. After all, manufacturing costs for the PS3 and Blu-ray have lowered, which means they can make more PS3s and drop the price. Personally I'd say none of them are going anywhere since all of them have a big company behind them. PS3 has Sony 360 has Microsoft Wii has Nintendo So I doubt anyone's gonna leave the console business soon.

RaNaBiR
RaNaBiR

More software support!

TheArcade
TheArcade

Just so I know... Where besides VGchartz do I get the data that tells me the PS2, Xbox, Dreamcast, and things like that sales unit?

impl0sion
impl0sion

Considering the ps2 has sold 140 million units in 8 years the fact that the ps3 has sold just over a tenth of that in a quarter of the time, at a time when more poeple are buying games than ever before, you can only consider it a faliure from sony's point of view. I agree with MagicOneUp, i can live without sony. Nothing they make is unique, there are dozens of companies manufacturing laptops, tv's, stereo's etc. I'd like to see companies like panasonic or sharp's profits to compare.

veganate
veganate

applauds to Krammin for hitting it on the nose.

MagicOneUp
MagicOneUp

Double applauds to kejigoto and TheArcade. i too can live without sony. i mean how much if the ps4 came out!

MagicOneUp
MagicOneUp

The Ps3 is a failure. there is no doubt about it. And at this economic hardship time, a $660au can goes a long way... which in turn i can buy a car with

Krammin
Krammin

People saying that the PS3 is a failure because of this news really need to get in touch with whats going on globally... This global economical crisis is hitting every major business globally... including MS who in it's 34 years of running had to cut 5000 jobs for the first time. This is bigger than PS3 vs XBOX, it's corporate greed at its best bringing down major corporations and causing millions of job losses around the world. People aren't spending because they are scared to due to the "recession" therefore, company's fire people to retain profit, and so on and so on and so on. Sony took a gamble with the PS3 which to me is the superior console (flame me as much as you want) BUT because of it being the superior console due to Blu-Ray capabilities, the cost of the console is more - the general public would rather spend less therefore, Xbox and Wii are doing amazingly. Either way people, there will always be technology out there to keep gamers satisfied, be it Sony, MS, Nintendo or whoever. So while the world crumbles, you can be in your lounge room tinkering away.

Icehearted
Icehearted

[quote]The games back then were mostly mega-hits![/quote] The thing about nostalgia is that it tends to be rose colored. I can recall quite a few stinkers from those days as well. Certainly was nicer when it was less about graphical power and physics and more about game play. You're right though, those were the days.

frazzle00
frazzle00

*Applauds* kejigoto and TheArcade. Couldn't have said it any better.

TheArcade
TheArcade

Sega Genesis Vs. Super Nintendo THAT was the golden age of gaming when everything was 2D and the developers weren't constantly pooping out garbage games along side the good ones. The games back then were mostly mega-hits! Well put kejigoto. I would like to add that the Genesis was notorious for it's high caliber Arcade ports.

kejigoto
kejigoto

@ brendanhunt1 I'd like to introduce you to the Super Nintendo, a console which many great franchises we see today got their start on and also is acclaimed for having one of the best gaming libraries of all time, and the Sega Genesis which is another amazing console which did great during the 90's. Also if gaming the industry was so bad back then, I highly doubt Sony would have jumped in hopes of improving a dying area of entertainment. If the gaming industry could survive Sega leaving the console business, I'm sure it could survive Sony leaving as well since Microsoft seems to be getting things together and Nintendo is doing rather well. In fact a console race is more than welcomed in my book and by my wallet.

tod123_
tod123_

well maybe now the sony fanboys will admit that the ps3 is a failure

beakerbun
beakerbun

Probably worth noting that Sony's marketing strategy has been "ghostly" to say the least. I prefer my 360, but I'm on my fifth console. Where was the "buy a console that really works" commercial? Also, games like LBP weren't pushed to the extent that people outside the Sony sphere really paid attention to them. But then again, LBP is a game that more or less appeals to famlies and most families don't jump to buy $500 video game consoles.

Icehearted
Icehearted

Analysts and game companies alike have repeatedly stated that the game industry is "recession proof", so dealing with "today's economy" may not be the issue, it could just be that Sony's expensive console has fallen flat under more popular, less expensive choices (such as the Wii, which I suppose is a boon and a curse). Another issue to consider was this large LCD price fixing scandal, one that had already seen millions in fines, and more fines abroad predicted. So inflated TV prices had already been holding back mass market appeal, which could in turn have also been a part of what struck at Sony's bottom line. I'm speculating, but these seem to be the larger issues for the company. You can't sell Blu-Ray to people that don't have an hdtv, and if inflated prices held that market back, then that's just another problem Sony has had to contend with since BR is a selling point.

frazzle00
frazzle00

@brendanhunt1 So are you saying that the NES, SNES and Genesis were huge failures? I hope you aren't, because that would mean you don't have a clue about what you're talking about.

zaphod_b
zaphod_b

OUCH! I do love my PS3. Hopefully this doesn't mean it will be going down the crapper. Oh well. That's why I also have a 360 I guess.

gow117
gow117

ivitaminwater guess i got to agree with you

brendanhunt1
brendanhunt1

Hitachi, LG, Panasonic, Pioneer, Philips, Samsung, Sharp, Sony, Mitsubishi, TDK, Apple, TDK, Dell, Hewlett Packard, The Walt Disney Company, Warner Bros and Universal Music Group are all part of the blu-ray disc association with sony being the leader, However there are 251 contrubuters

ivitaminwater
ivitaminwater

Well either way, both companies are dropping their prices. The 360 60gig will be 249 by june and the 80gig PS3 will be 299. Both companies are trying their best and whoever is mocking one or another definitely doesn't know anything about today's economy and how both companies are trying to keep alive in the situation they're in.

LosDaddie
LosDaddie

Sony's horrible PS3 strategy has no doubt played a large in this decline. :)

KC_Hokie
KC_Hokie

brendanhunt1 - I'm sure the other 17 corporations that own part of blu-ray are thankful that Sony did all that work in the format war and took a big hit in the process. But a thanks is all they're going to get as there are now multiple companies that make blu-ray devices other than Sony. And it's those other companies that won't allow Sony to drop the price on their PS3 due to the blu-ray player inside it. Blu-ray for Sony turned out to be a major double-edged sword.

brendanhunt1
brendanhunt1

no matter what happens i sure sony can make there money back from playstation with 20 million users, it was playstation 3 that got blu ray to beat the format war

brendanhunt1
brendanhunt1

@kejigoto The gaming market did terrable in the early 90s till ps one came out

JackHoleFace00
JackHoleFace00

I don't care what any fanboy says: Even if you hate Sony, this is a sad day. 16,000 good people losing their jobs? Yikes. And, as others have mentioned, it's good to have competition. Personally, I think Sony's library is excellent. Titles like MGS4 & Little Big Planet are great, and then there are upcoming games like Killzone 2 and Massive Action Game (MAG), which look amazing. Much more so than most of the tripe that comes out for the Wii. The old adage is that "the games are what matters"...but perhaps not this round. But even Sony must concede that yes, the initial price is still a major barrier (even though I believe it's a better value than the DVD/Blu-Ray-less, hardware-accessory-riddled Wii). I just hope Sony finds their way through this. They've always made good products since long before they got into gaming.

kweeni
kweeni

i hope sony wont leave the gaming industry i don't want xbox because you have to pay for live i don't want wii because...well...its just meh so all there is left is playstation stupid economic crisis

kejigoto
kejigoto

@ p2250 Gaming got along just fine before Sony, and if Sony does leave the gaming world, it'll get along just fine without it. @ Fusion_Master This goes well beyond the Playstation 3 and its poor performance. All three platforms from Sony failed to stand up on their own at the end of 2008 and in the months that truly counted they didn't even amount to half of what Microsoft and Nintendo were pulling in. Add that on top of their lackluster TV sales which shows with them closing a factory and cutting the division by 30%. Sony is hurting all across the board right now and there is no simple way out of this mess they've landed themselves in. Its going to take more than a good price cut and a few good games here and there to turn this around. Also I think its funny that Kaz just recently came out and said they were still leading the industry and everything was fine. That Microsoft can't compete with them and the Wii isn't something to worry about, that they are winning in "their" world and that's what really counts. However jump over to reality and you get this. Not good for any company. Microsoft may be trimming the fat here and there, but its nothing even close to this level that Sony is doing.

KC_Hokie
KC_Hokie

Competition is always crucial in areas such as electronics and I hope Sony can get their act together in terms of the PS3. I owned the PS and PS2 and have always enjoyed their products, but the PS3's cost, limited gaming library, inferior multi-player network and lack of versatility steered me towards the purchase of the 360 in Sept. I now spend 6-10 hours a week on my 360 and nearly half of those streaming Netflix movies. Sony needs to drop the price on their PS3 as soon as possible, buy the rights for more exclusives, and improve their multi-player network even if that means charging a few bucks a year. Until then I see little reason to purchase one as I don't own a single blu-ray disc.

plm3d_basic
plm3d_basic

Well I hope Sony doesn't go bankrupt or stop supporting the PS3 and quit the gaming market. Without a healthy competition then we're left with the Nintendo Wii and xbox360 which can't be good for innovation, especially when MS stated that they are approaching their next system with the Wii in mind. Translation, an xbox720 for casual gamers, ugh.

THE-FLOW-SIDE
THE-FLOW-SIDE

well is the least thing that could happend...the company is known as one of the biggest in the world and can make changes is the socity. they should make things that are usefull and less expensive.

carljohnson3456
carljohnson3456

I'm personally kind of excited about this "restructuring" as I've heard Stringer wants Sony to go in a more software driven route than hardware. Of course, Sony will never leave it's hardware roots... so I think it'll be awesome if Sony ever manages to become a software giant comparable (probably not equal) to Apple. The potential is there... just look at the PSP. Sony just needs to expand on software.

FlashCharge
FlashCharge

The cost cutting measures have not address efficiency and making Sony's products competitive in the market place. ''the price of the Wii and the 360 are its main advantages over the PS3. One might concluded that their game libraries are larger but Sony is headed in the right direction in improving their own library of great games. Innovation and a quality product will improve Sony's statue in the market place. Listening to the desires of their consumers and offering great support will bring back loss sales. These are some steps that were not mentioned in the report.

beakerbun
beakerbun

You are right about the Houser comment, I'll give you that. I'd place my bet, however, with the next GTA game coming out on the current-gen platform and the next evolution of GTA happening on the next round. Vice City and San Andreas made a ton of money for Rockstar and I think they would at least want to see one interative sequel that can run on the 360 and take advantage of its large install base.

asimplerapper
asimplerapper

Imagine how much worse Sony would have been in if the PS3 did not have price cuts. For example the $600 and $500 versions still for sale =O