Sony axes 8,000 jobs as Samsung sees trouble ahead

 

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By Reuters

Posted on 9 Dec 2008 at 14:55

Thousands of job cuts at Sony and negative outlooks from companies such as Samsung and Texas Instruments have deepened the tech gloom.

Demand for consumer electronics has slumped in the run-up to Christmas as the financial crisis has grown into a broad recession that has already engulfed the US, parts of Europe and is dampening demand in emerging markets.

"Consumers have essentially stopped buying," says Brian Halla, chief executive of chipmaker National Semiconductor. "For the first time in a long time, you think before you buy the new gadget or choose to upgrade your phone."

Sony says it will slash 8,000 jobs, about 4% of its workforce, scale back investments and pull out of businesses as it aims to cut $1.1 billion in costs out of its ailing electronics operations.

The cuts - the biggest announced by an Asian firm so far in the financial crisis - and other restructuring steps underscore challenges facing Sony, which has fallen well behind Apple's iPod in portable music and is struggling to make money on flat-panel TVs.

Samsung is also cutting its targets for sales, capital expenditures and profit, reflecting an increasingly tough worldwide economy.

The world's top maker of memory chips and LCD screens is also facing a lengthy downturn in the once-reliable memory market and a rapid margin deterioration in the flat-screen TV sector.

"At a time when people are worried about losing their jobs and paying their mortgages it is not surprising that the consumer electronics industry is being hit," claims Gartner analyst Carolina Milanesi.

However, Milanesi offered some hope for the tech giants. "In the past, when things started to improve, it has also been one of the first industries to bounce back."

Chip makers Texas Instruments and smaller rival National Semiconductor have both slashed current-quarter revenue forecasts to far below Wall Street expectations as demand for mobile phone and analog chips came to a virtual standstill.

"Conditions are likely to get worse before they get better," TI's head of investor relations, Ron Slaymaker, claims.