Sony Corporation

  Transformation 60 - Confirming Sony's Position as a Leading Consumer
                       Brand in the 21st Century

Sony aims to continue being one of the world's leading consumer brands
in the 21st century, providing customers with a wide range of
attractive products, content and services. To confirm and strengthen
this position Sony has embarked on "Transformation 60", a series of
fundamental reforms to the Sony Group.

Transformation 60 will consist of:

1. Clarifying operational structure and concentrating technology and
resources for growth

2. Fundamentally reforming operational profit structure

Through these changes Sony aims to secure a consolidate operating
profit margin of at least 10% (excluding financial business) by the
end of FY06. Sony also believes that these changes will lay the
foundation for the creation of new value and significant growth from
FY06 onwards.

The essential elements of these changes are set out below:

1. Clarifying operational structure and implementing growth strategy

    * Convergence of electronics business

      The home electronics and mobile electronics sectors, and the
      semiconductor technology sector which supports them are 
      designated as core sectors. Sony will strengthen its 
      technological base.

    * Convergence of entertainment business

      By integrating assets in pictures, music and game, linkages with
      electronics will be strengthened as Sony aims to become a global 
      media content company.

    * Convergence of financial business

      Sony plans to set up a financial holding company comprising its 
      three companies: Sony Life Insurance Co., Ltd., Sony Assurance 
      Inc. and Sony Bank Inc. by April 2004. This is intended to 
      create the most appropriate management system for Sony's 
      financial business and to strengthen operations.

2. Fundamentally reforming operational profit structure

Sony will implement a second phase of group structural reforms,
covering electronics, entertainment and other major sectors, to revise
its profit structure radically.

    * Consolidated fixed costs are projected to be reduced by 
      approximately 330 billion yen by the end of FY06 (compared to 
      FY02) through focus on strategic business, accelerated reform 
      of the manufacturing sector, streamlining of corporate/
      administrative and sales divisions and reform of procurement for 
      production and non-production materials. Sony estimates this
      will result in a 4-point improvement in the consolidated 
      operating profit margin.

    * With an existing 4% operating profit margin, Sony estimates that 
      the result of the above fixed cost reductions, along with the 
      effect of other structural reforms and improved competitiveness 
      in the electronics sector, will allow the group to reach its 10% 
      operating profit margin target.

Details are given below:

Clarifying Operational Structure and Implementing Growth Strategy

1. Convergence of Electronics Business

Moving toward 2006, Sony will develop convergence strategies in the
Home and Mobile electronics sectors, by concentrating engineering
resources and utilizing the power of core semiconductors and devices.

Strengthening the development system for semiconductors and key
devices

The Semiconductor Solutions Network Company (NC President, Ken
Kutaragi) will be established to direct the Sony Group's semiconductor
strategy. The objective will be to increase the ratio of
semiconductors and key devices produced within the Sony group and thus
add value to home and mobile electronics products.

1) Establish roadmap for digital CE products based on most advanced
processors.

2) Establish a joint venture company to strengthen procurement of LCD
panels.

3) Accelerate in-house development of next-generation display devices
through strengthening related organization.

4) Solidify position as global leader in imaging devices by enhancing
CCDs and CMOS imagers.

Home Electronics

1) Developing the next-generation TV

    * Accelerate transition to flat panel
    * Pursue high-quality picture, high resolution large-screen
    * Digitalize, and configure for broadband network
    * Introduce powerful media processor (CELL)

2) Creating New Markets through Convergence of Electronics and Game
Technology

    * Convergence of real time visual processing technology and
      imaging devices
    * Deploy next-generation high-density optical disks like "UMD" as
      media platforms for game, pictures and music.
    * Create home environment where customers may enjoy multiple media
      devices such as PSX which can evolve into a home server 
      (CELL-based)

3) Accelerating the Move to HD World

    * Pursue super-reality image creation
    * Promote Blu-ray as the next-generation packaged media format.

Mobile Electronics

1) In conjunction with SEMC, integrate telecoms, imaging, AV and
computing to create new mobile electronics markets.

2) Building on Sony's strength in key devices to confirm Sony's
leading position in the digital imaging field through products such as
Camcorders and Digital Still Cameras.

3) Integrate Sony's contactless IC card technology, FeliCa, with a
range of Sony porducts. Establish a joint venture company with NTT
DoCoMo to create a service platform which integrates FeliCa with
mobile phones (announced October 27).

Strengthen Research and Development for next-generation technology

    * Next-generation broadband wireless communications
    * Network technology for information security, copyright 
      protection and authentication
    * Artificial Intelligence and sensing technology for more
      user-friendly interfaces.

Note:

The Sony group plans to spend a total of 1 trillion yen on
semiconductor investment and R&D in the three years starting from 
FY03. Approximately 500 billion yen will be spent on capital 
investment for semiconductors like CELL and imaging devices where 
major growth prospects are envisaged (185 billion yen in FY03). As 
electronics R&D, approximately 500 billion yen will be spent on key 
devices for product enhancement (150 billion yen in FY03).
* excludes R&D for prototypes

2. Convergence of Entertainment Business

Sony aims to heighten the value of its entertainment business by
strengthening its assets while integrating pictures, music, game,
electronics and services in innovative ways that dissolve traditional
boundaries. Through this, Sony aims to confirm its position as a
global media content company.

1) As distribution channels diversify, Sony will continue to pursue a
business model that integrates entertainment, electronics and network
businesses. As part of this, the company will introduce new music
distribution services that fit regional characteristics in USA, Europe
and Japan.

2) Pictures and music content will be developed for the UMD media
that will be adopted for PSP. Blu-ray Disc will be developed as a new
package media to grow a business centering on high-definition video.

3) Develop an integrated entertainment business strategy based on
content and distribution services in the Japanese market. This market
is characterized by an advanced broadband mobile environment and
diverse game software and animation content.


3. Convergence of Financial Business

To strengthen its financial business, Sony plans to set up a financial
holding company comprising its three companies: Sony Life Insurance
Co., Ltd., Sony Assurance Inc. and Sony Bank Inc. This is scheduled
for April 2004, subject to the approval of the relevant financial
authorities. The establishment of this holding company will enhance
the risk management system needed for financial sector business. Sony
also expects that strategic linkages between the three companies
within the holding company will allow it to develop integrated
financial services for customers. In the future Sony would also
consider the possibility of an initial public offering (IPO) for the
holding company to allow it to procure funds for growth and to realize
value.

Structural Reform Phase 2

1. Focusing Electronics Strategy

Sony will distinguish between strategic and mature categories for the
electronics business. Engineering and development resources will be
concentrated in strategic categories such as flat panel TVs, Home
Servers and mobile products. Mature categories such as Trinitron CRT
TVs, analog video systems and analog personal audio systems will have
their product engineering and development functions strengthened at
Sony EMCS. This will allow profit to be maximized even in a shrinking
market.

2. Accelerating Reform for the Global EMCS Production System

1) Creating Added Value

    * Engineering and production technology which is crucial in 
      enhancing product competitiveness will be strengthened globally 
      for a higher added-value manufacturing system.

    * Distribution functions will be integrated with the existing
      production, engineering and customer service functions of some
      factories to achieve advanced supply chain management. This will
      convert these to Customer Front Centers (CFCs).

2) The engineering and production system will be reconfigured to meet
specific regional needs.

    * Manufacturing links between Japan, China and Asia will be
      strengthened.

    Japan: Advanced production technology base (focus of manufacturing
    shifts from assembly to key devices and semiconductors). 
    Strengthened production of high added-value devices/
    semiconductors, and integration with mounting.

    China: Supply of products to the rapidly expanding domestic 
    market; cost-competitive mass production; device and module 
    production

    * Asia: Cost-competitive mass production and addition of CFC 
      functions

    * Europe/Americas: Mass-production of single category products to 
      meet local market needs; addition of CFC functions; 
      strengthening of regional production/sales systems

Through the continuous implementation of production reforms and
linkages with distribution, Sony expects to achieve an approximately
30% reduction in production/distribution/service points compared with
FY02 and a 30% rationalization of manufacturing floor space compared
with FY02.

3. Optimizing Human Resources and Reform of Personnel System in Japan

Sony plans to reduce the consolidated number of Sony regular employees
(154,500 at the end of March 2003, excluding the finance sector) by
about 20,000 over a 3 year period. This will include about 7,000
employees in Japan.

Corporate/Administrative and Sales Functions (including HQ)

    * Introduce a platform to integrate corporate/administrative
      functions which overlap several organizations/work centers.

    * Increase efficiency by consolidating work centers

      Europe: A part of an effort to pursue an integrated strategy of
      promoting electronics products with entertainment content and
      services, Sony Europe plans to bring together the consumer AV
      marketing groups in a new location in the UK, to create more 
      value an benefits to consumers, while at the same time increase 
      operational efficiency.

      USA: Electronics HQ and Marketing functions previously divided
      between the West and East Coasts will be reallocated mainly to 
      the West Coast. Corporate and administrative functions will be 
      made more efficient and linkages between sales and manufacturing 
      strengthened.

    * Streamline operations by consolidating or reducing product
      categories or operations

Production: Consolidate production/distribution and service points and
streamline manufacturing and corporate/administrative personnel.

In Japan, Sony will rigorously apply the "Contribution=Compensation"
Principle and make its workforce and employment structure truly
diverse. The objective will be to create a new relationship between
company and the individual employee.

4. Reforming Procurement for Non-Production/Production Materials

Non-Production Materials

Sony intends to cut fixed costs related to non-production materials by
12% compared to FY02. These are horizontal group costs for technology
outsourcing, purchasing/lease rental costs etc. Group procurement
management will be strengthened, central purchasing systems made more
efficient, and outsourced service functions integrated.

Production Materials

Sony's objective is to achieve cost-reductions, enhance engineering
and development efficiency and further promote product quality.

    * Standardization of parts: The number of registered parts is to
      be reduced to 100,000 by the end of FY05. (Current level 
      840,000). Of these, 20,000 will be designated as Sony-approved 
      and standardized throughout the company.

    * Suppliers: Suppliers of components and raw materials will be
      rigorously evaluated according to green procurement standards,
      adherence to legal requirements, and e-procurement. By the end 
      of FY05, the number will be reduced to 1,000 from the current 
      level of 4,700. This will realize strategic cost reductions.

With the above measures, Sony will implement the second phase of
structural reform in order to create a highly efficient, high
added-value operational structure. Over 3 years Sony plans to spend
approximately 335 billion yen (300 billion yen in electronics) to 
achieve annualised fixed costs reductions of approximately 200 billion 
yen (160 billion yen in electronics) in FY06 compared to FY02. In 
addition, cost reductions in non-production materials will help to 
achieve overall total annualized fixed cost reductions of 
approximately 330 billion yen (300 billion yen in electronics) in FY06 
compared to FY02. For FY03, Sony projects restructuring costs of 
approximately 140 billion yen (electonics 130 billion yen) resulting 
in annualized savings of approximately 78 billion yen (electronics 68 
billion yen) from FY04.

Inquiries

Sony Corporate Communications
TEL 03-5448-2200    FAX 03-5448-3061