Sony Plans on Reducing Workforce by 4% - December 9, 2008

How many more people will lose their jobs this year? You can add another 8,000 workers to that list, as Sony Corp. (SNE) announced early this morning that the company is reducing their workforce by 4% worldwide.

Of the 185,000 current jobs within the company, the cuts are in efforts to reduce costs by $1.1B a year by 2010 as the global economic crunch has taken hold in Japan. An additional 8,000 temporary or contractual workers will also be on the chopping block.

With such products as the PlayStation3, the Walkman, digital cameras, Blu-Ray disc players and the Bravia liquid crystal TVs, the company confirmed that all the cuts would come from the company’s electronic division.

In regards to the job loses, the company has announced that they will be closing five or six plants, or nearly 10% of their 57 factories. Analysts believe that, despite the recent moves, Sony may not fully recover from the economic downturn that has weighed heavily on the company’s profits.

In the company’s most recent quarter, which ended in September, Sony’s profits plunged more than 72% from last year’s totals. It has not been made public whether or not Sony plans on adjusting yearly expectations before they announce earnings for the next fiscal quarter. Sony reports their 3rd quarter earnings in January.

Recently, the company has made concessions about the lowering of full-year earnings expectations, claiming that net earnings are projected to come in at $1.5B, 59% lower than 2008’s yearly profits

A contributing factor to Sony’s troubles has been the recent surge in currency trading. With the Japanese yen increasing in value against the Dollar and the Euro, Sony has seen their profits reduced and their products less competitive in foreign markets. One way to combat reducing profits is to increase the prices for their products.

Along with additional measures, such as streamlining production and reducing inventories, the company has also shelved their plans for a substantial investment aimed at increasing production of their liquid crystal TVs.

Today’s announcement from Sony comes after the markets closed in Tokyo, where shares of Sony increased nearly 4% to trade around $20. In the U.S. markets, shares of SNE mirrored those in Japan, gaining 2.3%, to trade at $20.50 at the time of posting.

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