Sony cuts 8,000 jobs - but Wii consoles Nintendo

Contrasting fortunes for the Japanese giants, as Nintendo bucks the slowdown that is hammering Sony...

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Last Updated: 06 Nov 2012

Sony said today that it will slash 8,000 jobs in its core electronics division, about 5% of its workforce, after a year in which the global downturn (coupled with the soaring yen) has taken a huge bite out of its profits. And that’s just full-time staff – Sony is also likely to cut back substantially on its use of temps, as it shuts down about 10% of its global manufacturing operations in a desperate bid to cut over $1bn in costs. Meanwhile Nintendo continues to leave its rivals in the shade – although its success does at least give Sony some cause for optimism…

It’s been a tough year for Sony, which has seen demand for its electronic goods tumble as consumers around the globe tighten their belts. In a statement today, the company said it had been hit by the ‘sudden and rapid changes in the sudden and rapid changes in the global economic environment’, and specifically, a ‘rapid demand slowdown in television markets’. When your income is being squeezed, it’s a bit hard to justify shelling out on a new big screen TV (unless you're MT's editor, who was apparently gazing longingly at a 50-inch plasma in John Lewis last Saturday). Sony’s share price has now plunged 70% in the last year – leading some analysts to suggest that today’s cuts are too little, too late.

In addition to falling demand, Sony has also been battered by the appreciation of the yen, which has climbed by more than 10% against the dollar in the last few months (at a time when the dollar’s also been rising.). This makes it a lot more expensive for Japanese electronics firms to export their goods, so they’re finding it increasingly difficult to compete with rivals from elsewhere in the region. As well as Sony’s woes, Panasonic has also just announced a huge earnings downgrade – it’s now expecting full-year profits to be less than half the original forecast.

However, none of this appears to be doing too much damage to Nintendo, which said today that its Wii and DS consoles continue to fly off the shelves almost faster than they can supply them. Its shares may have halved this year (albeit having more than doubled in each of the previous two years) but Nintendo said today that console sales more than doubled last week (the US Thanksgiving holiday) – and the more consoles it sells, the more higher-margin video games it can shift too.

Sony continues to lag well behind Nintendo in console sales – but at least its videogame and film divisions are likely to cope pretty well in a recession as people go out less (Sony CEO Howard Stringer calls this the ‘Shirley Temple’ effect). Unfortunately, until it comes up with a category-killer like the Wii or the iPod (or even the Walkman) the prospects for its electronics division look a lot less healthy...


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