(23 September 2005 2:00 pm)

MUMBAI: Consumer electronics major Sony has announced a restructuring plan that involves a seven per cent reduction of its global workforce and the selling off of about $1 billion in assets as the company prepares to post a loss for the year.

4,000 cuts will come from Japan and the remaining 6,000 from overseas. Half the cuts will be in headquarters or be administrative. Sony has said that it expects to post its first annual loss in more than a decade this year. The company said it now foresaw a loss of $90 million, for the fiscal year ending 31 March 2006, down from a previously forecast $90 million profit.

The other cost cutting meassures will include product eliminations and clsoure of some factories. However Sony CEO Howard Stringer has said that cost-cutting alone is not enough to ensure Sony's future. The plan also includes organisational changes aimed at improving communication between Sony's notoriously autonomous divisions. Stringer is hoping that this cross-fertilisation will lead to new products that will enable Sony to stay ahead of low-cost rivals in China and South Korea, which are quickly climbing up the technology ladder

Sony is aiming to have sales of over 8 trillion yen and an operating margin of five per cdent by the end of fiscal 2007.

It will reduce the number of manufacturing sites to 54 from 65 and increase the ratio of components made in house. Sony also said it was cutting 20 per cent of its models. Sony expects to incur $1.9 billion in restructuring charges in the two years preceding March 2007. Stringer has promised to return Sony to profitability next year.

One common criticism is that Sony products were technically advanced but too hard to operate. Sony products too often run on Sony-only formats, alienating many consumers. Some versions of the Walkman could download music from the Internet only using Sony's Connect software, which is incompatible with the music format used on iPods.