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Sony to Cut 400 People Locally in Restructuring

Sony Electronics said it will cut some 400 people from its local headquarters office in Rancho Bernardo as part of a restructuring by parent Sony Corp. that will eliminate 5,000 jobs globally.

It’s the fourth time in 10 years that Sony has made significant job cuts in response to massive losses. For the fiscal year that ends in March, Sony (NYSE: SNE) said it will post a net loss of $1.1 billion.

Of the 5,000 people cut, about 1,500 were in Japan, and 3,500 were in the rest of the world. The affected jobs in the San Diego division include all functions and make up about a third of the 1,000 jobs cut in the United States, spokesman John Dolak said.

Sony notified the state of the number to comply with rules covering layoffs affecting more than 50 workers. The Sony Electronics division had about 2,000 employees prior to the cuts.

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Mike Fasulo, president of Sony Electronics, called the layoffs “extremely tough” and “absolutely necessary to position us in the best possible place for future growth.”

In 2012, Sony Corp. announced it would cut 10,000 jobs globally after it posted a net loss of $6.4 billion.

Last month, Sony announced a restructuring in response to the fifth net loss in the past six years. The company said a goal of returning the television and PC businesses to profitability this year won’t happen.

In fact, Sony is selling the PC business called Vaio, which has a big presence here. The company didn’t say whether the pending owners, investment fund Japan Industrial Partners, would keep Vaio employees in Rancho Bernardo.

Not Much in Store

In late February, Sony Electronics said it would also close 20 of its 31 retail stores, including one in San Diego at Plaza Las Americas shopping outlet mall in San Ysidro. The two other Sony Style stores in Fashion Valley and University Towne Center remain open.

Among the stores closed were those in some high-end shopping malls, including Tyson’s Corner outside Washington, D.C.; the Galleria in Dallas; and Westfield Century City Mall in Los Angeles.

Chris Briggs — senior vice president of Buxton, a retail consulting firm in Fort Worth, Texas — said it appears that Sony is pulling out of areas where the stores weren’t paying off.

“The perception is that some of the products they were selling weren’t as cutting edge as Sony used to be affiliated with,” Briggs said.

When Sony rolled out the retail stores in 2004, it was clearly taking a page from Apple Inc., which launched its retail stores in 2001 and has enjoyed high sales through the outlets. The stores enable potential consumers to touch and try products before buying, while providing services such as tech support and help with installation.

But duplicating Apple’s success is hampered in that Sony lacks certain aspects of Apple’s business model. Among those, Apple has its own operating system and software to go with its products, while Sony doesn’t, Briggs said. Also, Apple enjoys a huge advantage in terms of emotional connection to the brand, he said.

“You have to have raving fans to have your own store,” Briggs said.

Still Playing a Good Game

Sony continues to maintain a dominant market share in video games with its PlayStation 4 console selling briskly since its release late last year, beating sales of Microsoft’s X Box and Nintendo’s Wii consoles.

But when it comes to televisions, Sony has ceded a good deal of its market share to newer brands such as Samsung, Vizio and LG Electronics, according to several industry reports. Last month, Sony said its TV division would lose about $244 million for the fiscal year ending in March. It marks the 10th straight year of losses for the division.

In Sony’s statement on the layoffs, the company said it will continue to focus on maintaining its strong market position in ultrahigh-definition TVs called 4K. Sony also plans to push premium products, “including its digital imaging line, high-resolution audio, and full suite of professional solutions, while leveraging its strengths in hardware, content and gaming.”

Analysts who cover Sony said the changes are needed if Sony is to survive. But a few said Sony should be more aggressive in divesting itself of money-

losing business lines.

“Electronics is its Achilles’ heel,” said Atul Goyal, an analyst with Jefferies LLC. “In our view, it is worth zero.”

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