Restructuring Sony

Sony's revenues fell by 6.9% to ¥1.6 trillion for the corresponding period. Analysts were of the opinion that Sony's expenditure on its restructuring initiatives had caused a significant dent in its profitability. In the financial year 2002-03, Sony had spent a massive ¥100 bn on restructuring. Moreover, the company had already announced in April 2003 about its plans to spend another ¥1 trillion on a major restructuring initiative in the next three years. Analysts criticized Sony's management for spending a huge amount on frequent restructuring of its consumer electronics business, which accounted for nearly two-thirds of Sony's revenues. In 2003, the sales of the consumer electronics division fell by 6.5%. Notably, Sony's business operations were restructured five times in the past nine years.

Sony reported a net income of ¥115.52 bn in the fiscal 2002-03 compared to ¥15.31 bn in 2001-02 (Refer Table I for Sony's key financials in past 13 years). A statement issued by Sony said, "The improvement in the results was partly due to the restructuring of its electronics business, especially in the components units. At the beginning of the new millennium, Sony faced increased competition from domestic and foreign players (Korean companies like Samsung and LG) in its electronics and entertainment businesses. The domestic rivals Matsushita and NEC were able to capture a substantial market share in the Internet-ready cell phones market. Analysts felt that the US based software giants like Microsoft & Sun Microsystems and the networking major Cisco Systems posed a serious threat to Sony's home entertainment business.