Sony to slash suppliers as CEO's mettle tested
TOKYO -- Sony said it will halve the number of parts suppliers to slash costs under a turnaround plan that's testing the mettle of Chief Executive Howard Stringer.
The Japanese electronics and entertainment company plans to cut purchasing costs by 500 billion yen ($5.3 billion), or 20% of the 2.5 trillion yen spent during the fiscal year ended March, company spokeswoman Mami Imada said Thursday.
Sony — whose businesses span video games, camcorders and flat-panel TVs as well as movies and music — has been restructuring under Stringer, a Welsh-born American who became the first foreigner to head Sony in 2005.
But analysts say his true test starts now — after he took on the additional role of president in February to speed up efforts to reshape Sony. At that time, he announced a new team of four Japanese executives under him, representing the various businesses.
Sony sank to its first annual net loss in 14 years for the fiscal year ended March, racking up 98.9 billion yen of red ink, battered by sliding global demand, a strong yen and declining gadget prices. It is expecting an even bigger loss this year.
Koya Tabata, analyst with Credit Suisse in Tokyo, said Stringer has perhaps another year and a half to turn things around before his position becomes untenable.
Sony needs to pursue low-end, high volume business and improve management of inventories to boost earnings from electronics as well as expand its distribution network to improve profit from games, he said.
"However, the company has yet to present a clear strategy," Tabata said.
The streamlining of parts makers is the latest step in Stringer's drive, according to Sony.
Sony will reduce the number of its parts makers from about 2,500 now to about 1,200 next year. That message was relayed to suppliers this week.
One of Stringer's pet themes is stressing how the various divisions of Sony need to work together. He has said the units often don't communicate well with each other, hinting that they even tended to be territorial.
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