The Incredible Shrinking Sony

In 2000, Sony was worth an impressive $200 billion. Today, some estimate that it has lost 90% of that value and is worth just $20 billion. A report from Reuters indicates that the latest cost-cutting strategy will involve laying off about 6% of the company’s workforce, or about 10,000 jobs. It is planning to sell off some divisions and merge others. For example, it is creating a new LCD small panel company called Japan Display that combines the resources from Sony, Toshiba, and Hitachi.

These are hard times for Japanese LCD makers. The liquid crystal technology was originally invented in the United States, but it was the Japanese who first managed to develop it into commercial products. Now the Korean giants of Samsung and LG dominate the business, with Taiwanese and Chinese factories taking ever larger shares of the pie. As reported here, Sharp has had to sell half of its interest in the world’s largest LCD factory to Foxconn’s parent, Hon Hai. (This move was set in motion in part by Sony’s decision not to exercise its option to increase its investment in the plant.)

As the demand for large flat screen HDTVs continues to cool, the downward pressure on prices and profits continues unabated, making it more difficult for these companies to recoup their enormous investments in the technology. Whether Sony can survive remains to be seen, but the company is but a shadow of its former self, and it may not have the strength left to play with the big boys.