Japan's Sony Corp, facing a second year of losses, said on Thursday that it would cut its number of suppliers by more than half to reduce procurement costs by $5.3 billion a year.

The electronics and entertainment giant, which recently announced its first annual loss in 14 years, will keep about 1,200 suppliers from the current network of 2,500, company spokeswoman Mami Imada said.

She added, "We plan to purchase parts and supplies as 'Sony group', rather than individual business groups making separate orders. By reducing the number of suppliers, orders to individual suppliers should increase. This should allow us to negotiate lower prices." In the past, Sony's units have each worked out contracts with different suppliers.

Chief executive Howard Stringer is under pressure to turn around the company as it heads for its first back-to-back annual losses since it was listed on the stock market in 1958. Sony logged a net loss of 98.9 billion yen ($1 billion) in the fiscal year to March and expects to end this year 120 billion yen in the red.

Sony - whose businesses span video games, camcorders and flat-panel TVs as well as movies and music - has been restructuring under Stringer, a Welsh-born American who became the first foreigner to head Sony in 2005.

The company aims to cut procurement cost by 500 billion yen, or about 20 per cent, in the current fiscal year amid fierce price competition. "If the prices of the final products fall, we must also find ways to reduce production cost," Imada said.

Sony is cutting 16,000 jobs and shutting about 10 per cent of its manufacturing plants as part of efforts to reduce costs by 300 billion yen a year. The company has had a difficult few years in the face of tough competition from rival products such as Apple's iPod and Nintendo's Wii game console, which is luring buyers away from its PlayStation 3.

The drop in prices of electronics products has also hurt Sony. "The prices of digital home appliances have been declining by 15-20 per cent every year lately. Unless we cut costs, we cannot hope to survive the price competition," Imada said. The yen's strength is dealing an additional blow to Japanese companies because it cuts into profits earned overseas.

Last week, Stringer brought on board George Bailey from IBM as senior vice president in a new position called "chief transformation officer," to oversee Sony's network products, content and services. "We are fundamentally transforming Sony into a more innovative, integrated and agile global company," Stringer said in a statement.

Bailey brings his experience from leading changes at IBM, including setting up a profitable industry consulting practice there, according to Sony. Before that, Bailey was at PriceWaterhouseCoopers for nearly a decade.