Sony Announces Procurement Cost Killzone for PS3
by John Paczkowski
Posted on May 21, 2009 at 5:06 AM PT
Facing back-to-back full-year net losses, Sony is taking a hatchet to its fixed costs in a yet another bid to return to profitability. The company plans to halve its roster of suppliers to 1,200, shaving a clean 20 percent off its procurement bill. That should save it 500 billion yen ($5.3 billion) in purchasing costs this fiscal year as it as it trades higher-volume orders for lower prices from its remaining parts suppliers. Nissan (NSANY) did something similar to turn itself around a decade ago, so Sony’s move is not without precedent.
And at this point, the company clearly has to do something. Its last financials were grotesque and the ones to come promise to be little different. The “transformation” Sony began four years ago is still a work in progress, arguably one that’s been stalled for some time now. Once an electronics powerhouse, Sony (SNE) is now a laggard in many of the markets it once dominated: videogame consoles, digital music players and TVs. “The prices of digital home appliances have been declining by 15% to 20% every year lately,” said Sony spokesperson Mami Imada. “Unless we cut costs we cannot hope to survive the price competition.”
