Sony Undertakes Massive Restructuring

After seeing its shares on the Nikkei index fall by 22% this year, Sony Electronics has undertaken a massive restructuring of its operations under the moniker, "Transformation 60." The changes aim to clarify the company's operational structure as well as better position its technology and resources for growth. Under the plan, Sony will cut approximately 20,000 jobs over the next three years.

"Transformation 60," which was discussed at a meeting of Sony executives in Tokyo late last month, aims to secure a consolidated operating profit margin of at least 10% by the end of fiscal year 2006. The company is implementing a two-pronged approach to this by 1) clarifying its operating structure and concentrating technology and resources for growth and 2) by making extensive reforms to its operational profit structure.

Sony has taken a hit in consumer markets as ODMs (original design manufacturers) in Taiwan, Singapore, and Hong Kong can design and supply inexpensive consumer electronics to companies such as Gateway, Dell, and Virgin, making it easier for them to get into consumer electronics.

Sony also plans to restructure its workforce, laying off about 20,000 of its approximately 154,500 global employees by 2006. About 7,000 job cuts will be made in Japan. As for cuts to Sony's professional broadcast division, Sony Electronics senior vice president of corporate communication Rick Clancy said, "There is no indication [of that occurring] at all [thus far]."