May 21, 2009

Sony Restructuring Move Will Cut Suppliers By Half

In a move to restructure efforts amid mounting losses, Sony Corp said on Thursday it would halve the number of its suppliers in the next two years and aims to slash procurement costs by 20 percent this year, Reuters reported.

The company also plans to cut fixed costs by more than $3.16 billion.

Shares in Sony, which competes with Samsung Electronics in flat TVs and Canon Inc in digital cameras, fell more than 1 percent along with those of other exporters, hurt by a firmer yen.

Sony vies with Panasonic Corp for the title of the world's largest consumer electronics maker, but has been overhauling operations as it expects a second straight year of losses due to weak global demand for consumer electronics goods.

The strengthening yen has also slowed Japanese companies, as it cuts into profits earned overseas.

Mizuho Investors Securities analyst Nobuo Kurahashi said he isn't sure how effective the cuts will be because it's just operational streamlining and wouldn't simply push up earnings or bear fruit immediately.

"But it is very good that we are seeing more and more concrete restructuring measures at a quick pace," he said.

Sony plans to cut its suppliers to about 1,200 from the current 2,500 by March 2011 and will cut costs by increasing the volume of parts and materials purchased from each supplier, Sony spokeswoman Mami Imada.

Sony Computer Entertainment Inc, the video game subsidiary that has enjoyed considerable freedom in purchasing supplies, will be part of the consolidation of suppliers.

The company has forecast an operating loss of $1.2 billion in the year to next March, after logging a $2.4 billion loss last business year.

Sony announced the cutting of 16,000 jobs and will close 14 percent of its 57 manufacturing sites.

In line with a fall in the benchmark Nikkei average, shares in Sony lost 1.4 percent to $26.


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