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Sony exec pledges a real turnaround

Company cutting jobs, closing plants, shedding businesses

Sony CEO Howard Stringer, left, and President Ryoji Chubachi show the latest Walkman music players.
Sony CEO Howard Stringer, left, and President Ryoji Chubachi show the latest Walkman music players.
Shizuo Kambayashi, Associated Press

TOKYO — Sony Corp.'s Howard Stringer, the first foreigner to head the Japanese electronics and entertainment company, promised a decisive turnaround Thursday centered on cutting jobs, closing plants and shedding unprofitable businesses.

But many analysts said his plan lacked creativity and vision for a world in which consumer electronics companies are being forced to adapt nimbly to shifting information and entertainment consumption patterns brought on by the Internet and wireless revolutions.

Those same analysts did not, however, deny the need for cost cuts, which included slashing 10,000 jobs, or about 6 percent of Sony's global work force, by the end of March 2008.

The shake-up also calls for closing 11 of Sony's 65 manufacturing plants and shrinking or eliminating 15 unprofitable electronics operations by the same deadline. Sony refused to say what those businesses were.

Stringer, a British-American dual citizen, acknowledged that times have changed. Unlike the old days when Sony ruled electronics with its manufacturing finesse, it now faces tough competition and cheaper prices that are turning Sony products into mere "commodities," he told reporters at a Tokyo hotel.

"Staying ahead of this curve by offering the consumer truly differentiated products where we can maintain our standing as a premium brand is a fundamental strategic imperative," Stringer said. "We need to focus selectively and aggressively on being the No. 1 consumer electronics and entertainment company on the planet."

Sony said it would focus now on so-called "champion products" including the PlayStation3 next-generation videogame console, Bravia liquid crystal display televisions and Walkman MP3 music players — whose sales are miserably far behind those of Apple Computer Inc.'s iPod.

Analysts were not impressed by Stringer's game plan.

Instead of deciding on spin-offs or outlining a clearer way of relating electronics with entertainment, Sony's proposal sounded much like other plans to streamline the corporate structure to eliminate redundancies, they said.

"If I had to give a grade to Howard Stringer, I'd give him a C-plus," said John Yang, analyst with Standard & Poor's in Tokyo. "Sony still wants to be the master of the universe. They want to conquer entertainment; they want to conquer consumer electronics; they want to conquer games."

Slightly more upbeat was analyst Mitsuhiro Osawa of Mizuho Investors Securities. Osawa said the direction Sony laid out was fundamentally sound, and all Sony must do now is show results, especially during the Christmas shopping season.

"If there had been good surprises in the announcement, the news would have been positive," Osawa said. "There weren't any surprises and so the news was neutral."

Sony's U.S. shares fell $2.02, or 5.6 percent, to close at $33.95 Thursday on the New York Stock Exchange.

Founded more than a half-century ago, Sony over the decades has symbolized Japan's stunning modernization, exemplified in the Walkman and PlayStation.

But the company has never really made good on its promise to dynamically balloon profits by linking its electronics operations with its movie and music units.

The company has been criticized for falling behind in slimmer TV models, such as liquid-crystal and plasma display sets, losing market share to South Korea's Samsung Electronics Co. and domestic rivals Sharp Corp. and Matsushita Electric Industrial Co., which makes Panasonic goods.

Sony also has been soundly beaten by Apple's iPod in what should have been a forte — portable music players — by clinging to CD and mini-disk formats and its own proprietary but unpopular format for digital music files.

All that has taken a toll on Sony's earnings. Its electronics sector has lost money for two straight fiscal years. Sony said Thursday it now expects a net loss of 10 billion yen ($90 million) for the year through March 2006, far worse than its initial forecast for a 10 billion yen profit, citing restructuring costs for the latest plan.

Under the plan — which Stringer said will cut costs by 200 billion yen ($1.8 billion) by the end of March 2008 — Sony will reduce 4,000 workers in Japan and 6,000 outside the nation, while factories would be cut to 54.

Sony, which did not give a country breakdown for overseas job cuts, employs more than 151,000 workers worldwide. Half the cuts will be from headquarters and administrative staff, while the other half will come from other areas.