Sony to Sell PC Business, Cut 5,000 Jobs

Officials with the tech vendor say that efforts to turn around the Vaio business have failed, and that instead they will focus on mobile devices.

Sony has become the latest system maker to shift its focus to the mobile device in the face of dwindling global PC sales, announcing that it is selling off its Vaio business and instead concentrating more of its efforts on tablets and smartphones.

The shedding of the troubled PC business is part of a larger restructuring effort at the giant Japanese tech vendor that will include changes within its TV business and as many as 5,000 job cuts.

The news comes Feb. 6 as Sony officials announce a drastic shift in their financial forecast for the fiscal year, predicting that the company will lose as much as $1.1 billion, three months after they said Sony would see a $294 million profit.

"Considering the drastic changes in the global PC industry that have been brought about by the rapid growth of mobile products, such as tablets and smartphones, and the pressing need for structural profitability improvements at Sony, we have decided to concentrate our mobile product lineup on smartphones and tablets," Sony President and CEO Kazuo Hirai said during a conference call with analysts and journalists to discuss the fiscal 2013 third-quarter financial numbers.

The company had tried to bring both the PC and TV businesses back to profitability by the end of the fiscal year in March, but it became apparent that was unlikely to happen, the CEO said.

Sony intends to sell the PC unit to buyout specialist Japan Industrial Partners (JIP), with the hope that JIP will create a new company that will continue the PC business and Vaio name for consumers and corporate users in Japan. Between 250 and 300 employees now in Sony's PC business in such areas as design, development, manufacturing and sales will be hired by the new company, according to a Sony statement on the deal.

Sony officials said they hope to reach a definitive agreement with JIP by the end of March.

The worldwide PC market has continued to shrink for the past couple of years as consumers and business users spend more of their money on tablets and smartphones, with Gartner analysts saying PC shipments worldwide fell another 10 percent last year. OEMs and component makers with tight ties to the PC market have been hard hit by the slowdown and have worked to grow their businesses in other areas to offset losses in the PC space.

Both Hewlett-Packard and Dell are aggressively building their enterprise IT solutions businesses, though officials with both companies have said PCs will continue to be an important part of their overall portfolios. Lenovo, the world's top PC maker, is looking to expand its server and mobile device businesses though the planned acquisitions of IBM's x86 system unit and Google's Motorola Mobility organization. Acer is rolling out its Build Your Own Cloud strategy to augment its struggling PC unit, while component makers like Intel and Advanced Micro Devices are extending their reach of their chip businesses beyond PCs and servers.

At the same time, many of these vendors also are cutting their workforces in hopes of trimming expenses. HP will have shed as many as 34,000 jobs by the end of the year as part of a multiyear turnaround plan, while others—from Intel and Acer to Cisco Systems and IBM—also are cutting workers. Earlier reports of Dell laying off up to 15,000 have been denied by the company, though officials have said a smaller number of workers have taken voluntary buyouts.

The latest round of layoffs comes two years after Sony announced 10,000 job cuts.

Roger Kay, principal analyst with Endpoint Technologies Associates, said the trend of job cuts will probably continue as the industry increasingly transitions toward mobility and cloud.

"What becomes apparent when one takes all these individual company decisions together is that important sectors of tech, which were previously fonts of job growth, are no longer the gold rush that they once were," Kay wrote in a column for "Yes, some companies are thriving, growing, and hiring. Apple and Samsung, the two biggest winners in high mobility, are stable. And Google, Facebook, Twitter, and others participating in the newer (and higher growth) markets are doing fine. But the rust belt of the industry, hardware manufacturing, is a tough place to be. And it's hard to see that situation changing in the foreseeable future."