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Sony Faces Its Decision Time As It Cuts 1,000 Jobs

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Sony Faces Its Decision Time As It Cuts 1,000 Jobs

Sony Corporation (NYSE:SNE) (TYO:6758) is restructuring the global operational structure of its mobile business. The Japanese electronics and entertainment company plans to cut its workforce by 15 percent, or 1,000 jobs, in Sweden starting this year, until the end of 2014.

Sony Corporation (NYSE:SNE) (TYO:6758) already sent a redundancy notice to the Swedish authorities regarding its workforce reduction.  The company said 650 employees performing different functions, of which, 350 are consultants will be laid off.

The corporate headquarters of Sony Mobile Communications (Sony Mobile) in Lund, Sweden will be transferred to Tokyo in October of this year in order to enhance its development capabilities and operational structures. Sony Mobile aims to improve its market efficiency, streamline supply chain management, and reduce costs. Lund will remain a strategic site for Sony Mobile’s software and application development.

In a statement, Kunimasa Suzuki, president and CEO of Sony Mobile said its parent company recognized its mobile division as one of its core businesses, and the Xperia smartphone is gaining popularity among consumers worldwide. According to him, Sony Mobile is stepping up its integration with the Sony group, and strengthening the profitability of the business.

Last February 15, 2012, Sony bought acquired the remaining 50 percent stake of Telefon AB L.M. Ericsson in its mobile-joint venture. The Japanese company paid €1.05 billion to the take full control of Sony Ericsson Mobile Communications AB.

In April, Sony Corporation (NYSE:SNE)’s chief executive officer, Kazuo Hirai, unveiled its growth strategy after suffering four consecutive years of losses. Hirai reduced 60 percent of its TV business and concentrates on its mobile business (smatphones & tablets), digital imaging business (cameras and camcorders), and PlayStation game network. Hirai also said that the company will cut 10,000 jobs, wherein 3,000 jobs will be reduced from its chemical business, and the rest from its global work force. Obviously, Sony Mobile’s employees in Sweden were the first hit by Hirai’s revival plan.

Hirai aims to develop its Xperia smartphone portfolio as a leading mobile device and to triple its sales to $22 billion within three years. His target sales for its games division is $12 billion and $19 billion for its imaging business, all this hopefully by March 2015.

Sony’s products lost its market share in the United States to its other electronics manufacturers, such as Apple Inc.(NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94).

Meanwhile, Eichi Katayama, research analyst of Bank of America Corp (NYSE:BAC) Merrill Lynch states that this is ‘decision time for Sony’, noting:

Ending the losses in the TV business remains key to our investment view, although it is no longer the primary interest of investors now that the stock’s P/B has settled below 0.5x. They now await indications of the direction in which management plans to take the company. Now is truly the time for decisions: we have heard about moves such as making up lost ground in the smartphone market and expanding the medical/healthcare business. But management also needs to choose which areas to let go.

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Marie Cabural

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