by Anton Shilov
02/06/2014 | 11:10 PM
Sony Corp. has announced significant new measures to address reform of its TV business aimed to return the company to profitability. In a bid to streamline its TV unit, Sony will spin it off, enhance usage of outsourcing and reduce headcount of employees. Finally, Sony will attempt to focus on the high-end of the TV market in order to boost margins.
Sony has been engaged in various cost reduction initiatives for the TV business, as outlined in its TV business profitability improvement plan announced in November 2011. These initiatives include enhancing LCD panel-related cost efficiency and rationalizing R&D expenses, while also strengthening product competitiveness and operational efficiency in order to improve marginal profit ratio.
While Sony now anticipates that its target of returning the TV business to profitability will not be achieved within fiscal 2013 (ends on March 31, 2014) largely due to unexpected factors such as the slowdown in emerging markets and declining currency rates, the reforms executed within the TV business over the past two years are putting the business on a path to turnaround.
In particular, Sony has significantly enhanced product competitiveness and accelerated its shift to high-end models, especially in the area of 4K, where Sony has secured more than 75% market share in Japan (as of the end of December 2013, based on Sony research) and the U.S.. Sony has also taken the number one market share in the US for 4K models (during calendar year 2013, based on revenue).
Going forward, Sony will continue to shift its product mix and focus on increasing the proportion of sales from high-end models in fiscal 2014. Sony plans to reinforce the company's leading position in the 4K market by strengthening its product lineup while also bolstering its 2K models with wide color range and image-enhancing technologies. In emerging markets, Sony will aim to harness market expansion by developing and launching models tailored to specific local needs.
Sony will also accelerate and broaden its on-going cost reduction and operational improvement measures, focusing attention across all functions relevant to the TV business, including manufacturing, sales, and headquarters/indirect functions (as outlined below).
In addition, to help transform this business into a more efficient and dynamic organization, optimized in size and structure for the current competitive business environment and fully accountable for its operations, Sony has decided to split out the TV business and operate it as a wholly-owned subsidiary. The targeted timeframe for this transition is July 2014.
By implementing these measures, Sony is aiming to further enhance its TV business' profit structure and return the business to profitability during the fiscal 2014.