Pioneer, which has been hit hard by fast-falling prices for some of its key products, announced a wide-ranging restructuring plan on Thursday that will see it cut staff, consolidate divisions and refocus its product line-up.
Competition in the PDP (plasma display panel) TV and DVD recorder markets, both big parts of Pioneer's business, has caused prices to fall faster than expected, helping to push the Tokyo company into the red in the April to September period. Pioneer reported a YEN 12.3 billion (US$109 million) net loss for the six-month period, compared with a YEN 4.8 billion net profit in the same period last year.
On Thursday it revised its financial outlook. For the full year it expects a net loss of YEN 87 billion, compared with its previous forecast of YEN 24 billion and its actual net loss last year of YEN 8.8 billion. Pioneer's board decided last month that two top executives should step down to take responsibility for the poor results.
The restructuring will see Pioneer focus its PDP operations on own-brand products. At present the PDPs it makes are used in both its own products and those of other companies. The latter business is more volatile, so Pioneer will attempt to reduce its dependance on that area, it said. It expects the high-definition large-screen PDP business to grow rapidly in the future, it said.
Pioneer will also withdraw from the active-matrix OLED (organic light emitting diode) display market because it doesn't expect to make a profit there, it said.
In the DVD video recorder market Pioneer will concentrate on high-end products, and in the drives business it will work on Blu-ray Disc drives and OEM DVD video recorder drive units.
The reorganization will see the company's internal structure simplified from Jan. 1 into two divisions: home entertainment and mobile entertainment. The former will include its PDP (plasma display panel), DVD and home audio products operations, while the latter will consist of its car entertainment products.
As a result of the changes, its workforce at the three home entertainment divisions will be consolidated into a single location by the first half of 2007. This will lead to around 600 job losses, mainly at Pioneer sites in Japan. The company also plans to reduce the number of its production sites worldwide from 40 to about 30, meaning further job losses for around 2,000 people, it said.
Pioneer said it will also reduce the number of directors and executives. It cut the salaries of these staff twice already this year, once in January and once in October, leading to an overall reduction of between 20 percent and 25 percent.
Spending on research and development will also be reduced from the current level of around 8 percent of net sales to below 7 percent, it said.