UPDATE 3-Sony says may integrate domestic TV production

Thu Jan 22, 2009 2:07am GMT

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By Sachi Izumi

TOKYO Jan 22 (Reuters) - Sony Corp (6758.T) said it may integrate domestic TV production at one plant instead of its current two plants and is preparing to announce details of a restructuring plan later on Thursday.

The Nikkei business daily reported Sony will cut more than 2,000 full-time jobs as it moves manufacturing bases, and that it will make the announcement along with a downward revision to its earnings outlook on Thursday. [ID:nT35311]

Reeling as the global recession hits demand for electronics, the maker of Bravia LCD TVs and PlayStation game consoles is set to book an annual operating loss of about 100 billion yen ($1.1 billion), a person with knowledge of the matter told Reuters this month. [ID:nT345549]

That would be its first annual operating loss in 14 years.

Sony outlined plans last month to curb investment, close five to six plants and cut a total of 16,000 regular and contract jobs globally to save $1.1 billion a year in costs.

But analysts say Sony, which generates two-thirds of its revenue outside Japan, needs drastic measures that go beyond that, and that integrating domestic TV production was only one small step the electronics and entertainment conglomerate needed to take. "Its business model and operational issues account for 80-90 percent of Sony's poor earnings. Domestic production costs are a concern but this move is not something that would bring it back to the black or cut losses in half," said Nomura Securities senior analyst Eiichi Katayama.

"Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company," he added. "It will have to start cutting development costs in addition to production costs."

Sony's shares fell 2.7 percent in morning trade, underperforming a 0.2 percent decline in the benchmark Nikkei average .N225.

Rival Samsung Electronics (005930.KS) this month reorganised itself into two major groups in response to the global downturn, while Panasonic Corp (6752.T) has also cut its outlook and stepped up restructuring measures. [ID:nLG194627]

The Nikkei said Sony plans to eliminate about 3 percent of its domestic full-time staff, or more than 2,000 workers, mainly through to natural attrition, by the end of the financial year ending in March 2010.

But talk of cutting jobs in Japan has met internal company resistance, the Financial Times reported this week.

Sony's two domestic TV plants are located in Aichi, central Japan, and the company is looking at integrating TV assembly and parts production into one of the factories and using the other for distribution and other purposes, spokeswoman Mami Imada said.

She declined to comment on details, including the likely number employees to be affected by the move, and on the possibility of a cut to the company's earnings outlook.

The Nikkei also said Sony plans to slash executive and managerial-level bonuses to cut costs. (Additional reporting by Ted Kerr; Editing by Edwina Gibbs)

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