Japan reacts to Sony restructuring

TOKYO--Last week Sony Corp. announced disappointing earnings. This week, the consumer electronics giant followed that news with details of an ambitious restructuring plan, including staff cuts of 20,000 over the next three years. That number is close to 13 percent of its total workforce.

When a high-profile company like Sony makes that kind of announcement, people sit up and pay attention. There has been a lot of discussion of the situation here in Japan, both from the professional media and from the gaming community. It's clear to everyone involved that Sony is in a pretty deep hole, and no one is rushing to say that the company won't be able to dig its way out--especially Sony employees.

In the gaming chat rooms, the mood is apprehensive. Loyal PS2 users are worried about Sony's prospects, in particular whether or not the company can recoup the 1 trillion yen it says it will spend on R&D and facilities over the next three years. They also question the company's ability to implement its planned structural changes.

Traditional media have been forbearing; business newspaper Nihon Keizai Shimbun has restricted its coverage to straight-ahead, just-the-facts reporting, relaying, without comment, Sony's discouraging business results and the methods it plans to use to reach a stated goal of a 10 percent profit margin in FY 2006.

One recent article did include information that Sony planned to move immediately into large-scale production of the PSX, rather than ramp up production slowly as is common in the electronics industry.

Apparently, this move is intended to take advantage of early demand for the product. Sony hopes to sell as many units as possible immediately after the launch. There is an element of risk, as there's no guarantee that Sony will be able to ramp up production smoothly, and the effort to capture early sales may, in fact, lead to higher production costs or--in the worst case scenario--product recalls.

Finally, one Sony employee in Tokyo summed up the situation by saying: "I think Sony employees are apprehensive and not sure if the senior management is serious this time. They have not done enough--as in making the hard decisions to cut staff or divisions in the past--as we can see. [Instead], we've seen execs and divisions shuffled around without making substantial changes... I think it will be months until we realize if the changes enacted today really are the beginning of a new, revitalized Sony."