As losses mount, Sony's Hirai seeks cure for TV business in spinoff

Thu Feb 6, 2014 10:07am EST
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By Sophie Knight and Reiji Murai

TOKYO (Reuters) - Sony Corp Chief Executive Offer Kazuo Hirai is seeking to cure a TV business that has lost $7.8 billion over a decade by isolating it to speed up decisions on future strategy.

Hirai is spinning off TV operations into a separate business in the latest attempt to fix a division that he says for now remains central to the Japanese electronics maker. It's part of a broader restructuring: Sony also confirmed on Thursday it will sell its Vaio personal computer division, effectively ending 17 years in that business.

Sony said charges associated with the moves will combine with weaker showings than it expected in mobile phones, TVs and PCs to pitch it into a net loss this fiscal year of 110 billion yen ($1.1 billion). The maker of Bravia TVs and Playstation game consoles will cut 5,000 jobs - just over 3 percent of its global staff - as a result of the shakeup, counting on saving 100 billion yen in annual fixed costs.

Two years into the job, Hirai's gambit comes as Japan's electronics firms struggle to compete with deep-pocketed industry giants like Apple Inc and Samsung Electronics Co that dominate sales consumer gadgets like smartphone and tablet computers. Local peers Panasonic Corp and Sharp Corp are ahead of Sony on restructuring - the Vaio sale marks the first time Hirai has pulled a major consumer product line.

Speaking to reporters in Tokyo, Hirai said spinning the TV unit off into a wholly owned subsidiary did not mean a disposal is imminent. "If you are asking if we have any plan to sell off our TV business, I can say we have absolutely no plan to do so right now," he said.

But the CEO underlined that while he believes he can restore the company to lasting profit, it has to change. "I think we are heading in the right direction, and by making it a separate company we will speed decision-making up. As for the future, there are many possibilities, and not just for our TV business."

Having previously forecast a net profit of 30 billion yen for the current fiscal year, Sony is now heading for its fifth net loss within six years. The profit recorded in the year ended March 2013, Hirai's first in charge, was helped by the sale of two landmark properties in New York and Tokyo.

The company has come under fire from investors like Third Point's Daniel Loeb for failing to maximize value in some of its business lines. The comparison with Panasonic is on the surface unflattering: The rival has already swallowed expensive restructuring charges in a recovery from losses of $15 billion loss over two years to March 2013 to a forecast net profit of 30 billion yen this year.   Continued...

A logo of Sony Corp is seen outside its showroom in Tokyo February 5, 2014. Japanese electronics maker Sony Corp warned it expects a net loss of 110 billion yen ($1.1 billion) this fiscal year as it absorbs restructuring costs linked to its moves to exit the personal computer business. Picture taken February 5, 2014. REUTERS/Yuya Shino