Sony may announce drastic cost cuts: report

People walk out from Sony Corp's headquarters in Tokyo December 9, 2008. REUTERS/Toru Hanai

TOKYO (Reuters) - Japan’s Sony Corp is likely to announce closures of Japanese factories and major divisions early next month, the Times of London said on Monday, but the company denied any such plan existed.

The maker of Bravia flat TVs and PlayStation video game consoles faces halting sales and mounting piles of inventory in the wake of the financial crisis, even as a stronger yen bites into earnings.

Sony, whose empire encompasses semiconductors, movies and insurance, is braced for a series of measures that would abolish some of its domestic operations and transform the electronic giant’s business, the Times said, citing company sources. “We do not plan to announce additional restructuring measures at this time,” spokesman Atsuo Omagari said, in response to the report. “We don’t have any such plan.”

Sony announced a $1.1 billion savings plan in its electronics division in December, but it needs further and bigger restructuring measures to secure growth, analysts have said.

The company, which broke new ground with its Walkman in 1979, has fallen behind Apple Inc’s iPod in portable music and is losing money on its flat TVs.

It said last month that it would cut 16,000 jobs, curb investment and pull out of businesses for savings of 100 billion yen a year, as the holidays failed to coax spending.

Sony expects its operating profit to nearly halve to 200 billion yen ($2.18 billion) in the year to March, but 17 analysts polled at Reuters Estimates gave a mean estimate of 45.8 billion yen, down almost 90 percent.

Shares at Sony closed Monday trade up 2.5 percent at 1,970 yen, while the benchmark Nikkei average rose 2.1 percent.

Reporting by Mayumi Negishi; Editing by Edwina Gibbs