Sony reorganisation emphasises networks

The 'next phase' Sony has to concentrate on is 'the importance of further growing our network business,' Sony president Nobuyuki Idei said yesterday, announcing a plan for Sony to regroup its disparate electronics operations into three units, each emphasising the importance that data networks will play in Sony's future as a seller of digital hardware, software and content.

As part of a larger reorganisation, Sony is to regroup its disparate electronics operations into three units, each emphasising the importance that data networks will play in Sony's future as a seller of digital hardware, software and content, the company announced yesterday.

The Tokyo-based consumer electronics giant will also privatise three Sony-related companies including Sony Music Entertainment (Japan). The move, under which Sony will buy back shares from the trio of companies, will cost the organisation just under $US3 billion, based on current market valuations.

Sony's games unit, Sony Computer Entertainment (Japan), currently owned by Sony Corporation and Sony Music, will become a wholly-owned subsidiary of Sony, officials said.

In addition, Sony by 2003 will reduce its workforce by 10% through attrition and will close 15 factories worldwide, company officials said. The changes will strengthen Sony's core electronics business and enhance "the value of our company for shareholders," said Nobuyuki Idei, Sony's president.

The changes will be effective April 1, the start of Sony's new fiscal year, Sony officials said.

Investors appeared to welcome the announcement: Sony's shares closed at 10,940 yen (US$89.8), up 890 yen for the day.

Idei characterised the changes as part of Sony's long-term plan to merge its traditional consumer electronics business with today's computer and networking technologies. Since becoming president four years ago, Idei has focused on changing Sony from an "AV" (audio-visual) company to one that makes products that fuse AV and IT (information technology), he said.

Looking ahead, "the next phase we have to think about is the importance of further growing our network business," Idei said.

Sony's electronics units, currently established as autonomous "divisional companies" will be absorbed by three larger sub-companies, he said. Each company will focus on developing new network-related businesses around Sony's products.

The largest of the units will be the Home Network Company which will oversee Sony's television, video and audio products. The Personal IT Network Company will manage Sony's PC, telecommunications and imaging products and will be headed by Kunitake Ando, who now runs Sony's IT company and is in charge of its Vaio line of PCs.

In addition, Sony will set up a company to handle recording media and devices whose remit will include semiconductors, storage media and battery products. The unit will be called Core Technology & Network.

The realignment around networking formalises an ongoing push by Sony into technologies that can connect the company's content businesses at one end -- including its movie and music operations -- and its consumer electronics business at the other.

Additionally, Sony runs one of Japan's largest Internet service provision businesses. That business will be absorbed by a new unit called Digital Network Solutions which will try to build new classes of networked services, company officials said.

Officials said they hope the changes will make it easier for Sony group companies, while maintaining autonomy, to share resources, develop competitive products.

In January, Sony, citing price competition and Japan's lingering recession, revised its full-year earnings forecast saying that consolidated net income for the year ending March 31 will fall 28% to 160 billion yen. It was Sony's second revision of its earnings.

The thinking behind today's Sony reorganisation goes beyond a troubled economy at home. Idei pointed to the booming US economy and high flying IT sector as inspirations for the move.

Out of the US. corporate restructurings in the 1980s sprang "very competitive" vendors like Microsoft and Intel, he said. Now leading the way are network-related companies, Idei added, naming Cisco Systems and Amazon.comas examples. Those companies "have improved and increased their value in the market," he said. He asked attendees today to, "be patient and watch what develops from here."

Sony can be reached at +81-3-5448-2200 or at http://www.sony.com/.

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