Sony 1999 Annual Report Download - page 43

Sony Corporation Annual Report 1999
41
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service department and reports directly to Sony Corporation’s
Chief Financial Officer with respect to corporate risk
management. The Corporate Year 2000 Office also reports
the status of the project to Sony Corporation’s Executive
Committee and Board of Directors.
State of readiness
Customer Products;
By the end of October 1997, Sony completed its initial
identification and assessment project in respect of the
potential impact of the Year 2000 issue on its products
and since then has continued its identification and as-
sessment activities with respect to its products. By the
end of May 1998, Sony established a structure to enable
it to address this issue around the world. Sony is taking
steps intended to ensure that customers around the world
will be able to depend on Sony products in and after the
year 2000. In the broadcast- and professional-use prod-
uct field, Sony continues to work with its customers to
address the Year 2000 issue, and expects completion by
the end of September 1999.
Sony’s Year 2000 policy and compliance, and coun-
termeasures for Year 2000 problems found in certain
models of Sony products as well as contact points for
customers’ inquiries, are available through the Sony Year
2000 Web site at www.world.sony.com/year2000/
index.html.
Information Systems and Manufacturing;
As of the end of January 1999, Sony had completed
approximately 90% of its estimated total remediation
for major internal information systems and engineering
and production systems, and expects to fully complete
such remediation by the end of October 1999. Sony con-
siders that integrated tests are needed for the major
systems in Japan and the U.S., and plans to complete
them by the end of September 1999 in Japan and by the
end of June 1999 in the U.S.
For software and hardware which comprise Sony’s
information systems and major non-IT systems such as
production equipment which contain microcontrollers,
Sony has taken steps to assess the level of risk by ac-
quiring information from external vendors and, where
necessary, asking for written reports to confirm the status
of compliance measures for the Year 2000 issue. As for the
information systems provided by external vendors, Sony
has been obtaining confirmations from external service
suppliers and is conducting tests where necessary.
Sony is also addressing the Year 2000 readiness of
major parts and raw material suppliers by confirming
the readiness of not only their information systems but
also their management, production, and other facilities
and activities. Sony is also checking the status of order-
ing systems connected to major suppliers, sales distribu-
tors, and dealers by electronic data interchange.
Facilities and Infrastructure;
Sony is addressing the Year 2000 readiness of control
units of plants and buildings, such as clean room facili-
ties, telephone exchanges, networks, and 24-hour work-
ing facilities, by obtaining confirmations and
maintenance instructions from certain third party ser-
vice providers. In addition, Sony is confirming the Year
2000 readiness of third party service providers such as
companies which transport products distributed by Sony.
Costs
The external cost to modify software programs for internal
information systems for compliance with the Year 2000
issue is estimated to be approximately 8.4 billion yen, of
which approximately 5.3 billion yen was expensed as in-
curred by the end of the fiscal year ended March 31, 1999.
Additionally, while extremely difficult to estimate precisely,
the cost to replace certain internal information systems,
including hardware, relating to the Year 2000 issue is esti-
mated to be approximately 12.2 billion yen, of which ap-
proximately 8.6 billion yen was expensed as incurred by the
end of the fiscal year ended March 31, 1999. This cost
includes other elements such as enhancement of function-
ality of current systems. The cost to Sony for services per-
formed by third parties associated with the Year 2000 issue
for Sony products is currently expected to be approximately
0.6 billion yen. The Year 2000 external cost relating to manu-
facturing and facility equipment is not separately tracked
and such cost is principally included in the general expenses
with respect to each facility. Due to the difficulty of precise
tracking, Sony also generally does not separately track its
internal costs, which are principally related payroll costs,
incurred for the Year 2000 project.
Sony does not expect its total cost for replacement,
modification, and third party services related to its current
program of Year 2000 compliance to have a material ad-
verse effect on consolidated operations or financial results.