Cost cutting takes its toll at Sony

PROFITS at Japanese conglomerate Sony slumped by almost a quarter in the last financial year as the group booked hefty charges to underpin a restructuring of its mainstay electronics division.

Chief executive Nobuyuki Idei is racing to reduce Sony's worldwide headcount by 20,000 over three years while delivering new, enticing products. The twin initiatives are seen as vital to restoring solid profits growth.

For the current year to March 2005, Sony said it would take an additional 130bn yen (£669m) charge. Together with the 175bn yen booked in restructuring costs in 2002-2003, the three-year overhaul will have cost 473bn yen. For the fiscal year to the end of March, Sony posted a net profit of 88.51bn yen, down from 115.5bn yen in 2002-2003.

As expected, the company said it had taken a 168bn yen charge in the past year for restructuring.

Today it also reshuffled the top team at its mobile phones venture with Sweden's Ericsson.

Miles Flint, president of Sony Europe's marketing arm, will replace Sony Ericsson president Katsumi Ihara in June. Ihara will return to the main group.

Sony was more upbeat about prospects for the current 12 months, despite forecasting sales of its flagship PlayStation 2 gaming console would drop by a third to 14m units this year.

The company forecast that in the current year to next March its net profits would rise 11.3% to 100bn yen, marginally short of analysts' preresults estimates.

Despite the restructuring efforts, Sony remains on the lookout for new opportunities.

It is said to have teamed up with two private equity firms to bid $5bn (£2.8bn) for legendary US film studio Metro-Goldwyn-Mayer.