Sony on brink of upheaval as analysts back British chief
Leo Lewis, Asia Business Correspondent
Sony, the embattled Japanese electronics group, is on the brink of a corporate upheaval that could see job cuts and sweeping changes to management and manufacturing processes.
Company sources have told The Times that operations across the group are braced for a series of “sacred cow-slaying” measures that they believe will abolish or fundamentally alter many of Sony's long-established business practices.
The expected restructuring - considered by many analysts to be occurring far too late - is likely to be announced early next month, with the lion's share of the changes imposed on Sony's domestic Japanese operations in the form of factory closures and the abolition of several major divisions.
The restructuring is expected to be unveiled after this month's Consumer Electronics Show in Las Vegas and comes as analysts are warning that Sony faces long years of multibillion-dollar losses unless its president, Sir Howard Stringer, is given free rein to take on the company's old guard and erase many of its legacies.
Analysts are issuing blunt warnings of an impending flood of red ink in Sony. Their calls for deep changes in the company - supported by large investors - predict an imminent “all or nothing” moment for Sir Howard and the company of which he took charge in 2005.
Koya Tabata, a Credit Suisse analyst, recently warned investors that the restructuring of Sony is perilously overdue and must be radical. Sony management needs to make a rapid shift in its business model to one driven by earnings in the content business, he said.
The focus of research and development must be on software, he said, adding: “The most important thing is that, to improve organisational strength in the areas of development, purchasing and marketing, it will be necessary to further concentrate power in the hands of [Sir Howard] and unless this is achieved we believe [Sony] will be unable to close the gap with competitors such as Apple and Nintendo.”
Sony has already flagged the possibility of changes to its business model. A thinly detailed statement last month focused chiefly on short-term cost cutting, job losses of about 16,000 permanent and temporary staff, and a vow to re-examine the role of non-core or non-profitable businesses. The announcement did not say what these were. Deutsche Bank analysts described the restructuring plans as
“insufficient in scope and scale” and, along with other observers, noted that Sir Howard's longer-term plans would have to be fairly spectacular in order to restore investors' faith in the stock.
Despite the promise of reform inherent in the appointment of Sony's first non-Japanese head, sources close to Sir Howard describe three years of frustration as the company's British-born chief has tried to impose changes on an unwilling entrenched management. Those frustrations - and a clear internal cultural clash between Japanese Sony and its US and European operations - have finally begun to be noticed by Japanese analysts. Several have started to call for Sir Howard to be free to take a “gloves-off” approach to running Sony, even if that means that the axe falls most heavily on the group's Japanese operations.
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