Tough choices ahead for Sony

As company readies for a three-year restructuring, 15 unspecified business categories could be impacted.

Sony's plan to revamp its consumer electronics business has created a new set of questions about which brands and products will make the cut.

As part of a three-year restructuring announced on Thursday, the Tokyo-based electronics giant has identified 15 business categories that are at risk of being downsized, partnered or sold off altogether.

The company said it also plans next year to stop selling 20 percent, or one out of every five of its product models, to focus on the technology Sony feels has a future.

Sony spokesman Rick Clancy said the company is not ready to reveal which businesses or products are likely to be impacted. "We plan on revealing more in the course of quarterly earnings announcements or as specific developments dictate," he said.

Sony has, however, announced some details of its future plans. It said that it will lay off 10,000 employees and close 11 unspecified manufacturing sites, leaving the company with a total of 54 around the globe, Clancy said. Sony did not specify how the reduction would be done (e.g., through lay-offs, early retirements, attrition, or some combination)

As for product categories, some will more than likely be spared because they were just released and/or are selling well, Clancy indicated.

Among the items he highlighted as having particular momentum: Sony's Bravia HDTV flat-panel televisions, and televisions with Sony's Wega or SXRD technology; Sony's Vaio PC family; flash-based digital audio players such as the Sony Walkman Bean; Sony's DVD and high-definition format camcorders; and its Cybershot cameras.

Stephen Baker, an analyst at The NPD Group, suggested Sony should cut out some of the low-visibility categories, including non-MP3 portable music players, clock radios and car stereos.

"These midtier categories, ones where Sony has a history and where they may have a large but not a dominant share, are the logical ones to cut," Baker said.

He suggested Sony take a good hard look at diminishing its efforts on current DVD technologies such as DVD burners and focus instead on products that promote its Blu-ray next-generation DVD format. He also said the company should take its desktop PCs out of the hands of retailers and adopt a direct-sales model like the one used by Dell.

As for Sony's changes to its business model, Forrester Research analyst Ted Schadler said Sony needs to act quickly to better coordinate its engineers and product planning or risk losing out on more sales.

"Apple has accomplished this in music because it designs end-to-end and because they entered the market with a digital rights management-protected product (read: iPod) when no one else did," Schadler said. "But it was a one-off, not to be repeated in television, personal video, mobile communications or photography."

Ultimately, Sony's reconstruction will fall on the shoulders of Sony President and Sony Electronics CEO Ryoji Chubachi who will lead a team of familiar faces in making the bottom-line decisions.

Chubachi's key team members include Katsumi Ihara, the new president of Sony's TV Business Group, who once served as president of Sony Ericsson; Kiyoshi Nishitani, Sony's former Blu-ray Disc R&D division chief, who will head its entire Video Business Group; Yutaka Nakagawa, president of Sony's Digital Imaging Business Group and Audio Business Group; and Yoshihisa Ishida, who continues his role as senior general manager of Sony's Vaio business division.

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