Sony To Sell PC Business and Cut 5,000 Jobs

Sony announced a series of major changes Thursday and warned of a loss of $1 billion this year as it struggles to get a turnaround plan back on track. Sony said it was selling its loss-making Vaio PC unit, spinning out its television business by July 2014 and cutting 5,000 jobs. Sony will turn its attention to smartphones and hope to recover back to profitability again. Global PC shipments fell 10 percent in 2013, returning to 2009 levels, marking the worst decline ever, according market research firm Gartner. Sony established the VAIO brand in 1996 and was shipping nearly 900,000 units a year at its peak.

Here is the Sony statement on the sale of the company’s money-losing PC business

Following a comprehensive analysis of factors, including the drastic changes in the global PC industry, Sony’s overall business portfolio and strategy, the need for continued support of Sony’s valued VAIO customers, and future employment opportunities for personnel involved in the VAIO business, the Company has determined that concentrating its mobile product lineup on smartphones and tablets and transferring its PC business to a new company established by JIP is the optimal solution. Sony and JIP will now proceed with due diligence and negotiate detailed terms and conditions of the business transfer, targeting the conclusion of a definitive agreement by the end of March 2014. Following reevaluation of the product lineup, the new company is expected initially to concentrate on sales of consumer and corporate PCs in the Japanese market and seek to optimize its sales channels and scale of operations, while evaluating possible further geographic expansion.

Due to the implementation of the above measures across Sonys TV and PC businesses, and its manufacturing, sales and headquarters/indirect functions, Sony is anticipating headcount reduction of approximately 5,000 (1,500 in Japan, 3,500 overseas) by the end of FY14.

In order to execute these measures, Sony is allocating an additional 20 billion yen (approximate) in restructuring expenses in FY13 and a further 70 billion yen (approximate) in restructuring expenses in FY14. Sony expects these measures to result in annual fixed cost reductions of more than 100 billion yen (approximate) starting in FY15.

Sales and operating revenue (sales) were 2,412.8 billion yen (22,979 million U.S. dollars), an increase of 23.9% compared to the same period of the previous fiscal year (year-on-year). This increase was primarily due to the favorable impact of foreign exchange rates, the launch of the PlayStation 4, as well as a significant increase in sales of smartphones. On a constant currency basis, sales increased 5% year-on-year. Operating income increased 43.9 billion yen year-on-year to 90.3 billion yen (860 million U.S. dollars). This increase was primarily due to the favorable impact of foreign exchange rates, a significant improvement in the operating results of the Home Entertainment and Sound (HE&S) segment reflecting a decrease in loss in Televisions, a significant increase in operating income in th e Game segment reflecting the launch of the PS4, and a significant increase in operating income in the Financial Services segment. The current quarters results include a 32.1 billion yen (306 million U.S. dollars) impairment charge related to long-lived assets in the battery business in the Devices segment, an 8.2 billion yen (78 million U.S. dollars) impairment charge for long-lived assets in the PC business in the Mobile Products & Communications (MP &C) segment and a 6.2 billion yen (59 million U.S. dollars) write-off of certain PC software titles in the Game segment.