Thursday, May 21, 2009

Sony Corp to halve suppliers

TOKYO (Reuters) - Sony Corp will halve the number of its suppliers in the next two years and aims to slash procurement costs by 20 percent this year, it said on Thursday, stepping up restructuring efforts amid mounting losses.

Analysts saw the move as positive. It comes on top of a plan to cut fixed costs by more than 300 billion yen ($3.16 billion).

But Sony shares fell more than 1 percent along with those of other exporters, hurt by a firmer yen.

Sony, which competes with Samsung Electronics in flat TVs and Canon Inc in digital cameras, has been overhauling operations as it expects a second straight year of losses due to weak global demand for consumer electronics goods.

The yen's strength is dealing an additional blow to Japanese companies because it cuts into profits earned overseas.

"I'm not sure how effective this is because it's just operational streamlining and wouldn't simply push up earnings or bear fruit immediately," Mizuho Investors Securities analyst Nobuo Kurahashi said.

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

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

Its procurement costs currently total about 2.5 trillion yen.

The consolidation of suppliers will include video game subsidiary Sony Computer Entertainment Inc, which has enjoyed considerable freedom in purchasing supplies.
Sony, the maker of Bravia LCD TVs and PlayStation game consoles, has forecast an operating loss of 110 billion yen in the year to next March, after logging a 227.8 billion yen loss last business year.

It has said it will axe 16,000 jobs and close 14 percent of its 57 manufacturing sites.

Shares in Sony, which vies with Panasonic Corp for the title of the world's largest consumer electronics maker, lost 1.4 percent to 2,470 yen, in line with a fall in the benchmark Nikkei average.

(Reporting by Sachi Izumi; Editing by Michael Watson)


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