Quantcast
Connect with us

Hedge fund billionaire suggests breaking up tech giant Sony

Published

on

A proposal by a US hedge fund billionaire to spin off a chunk of Sony’s profitable music and movie business is shining a light again on what has been a long-time sore spot for the Japanese giant: electronics.

The once-iconic maker of the Walkman is rarely seen as anything but a gadgets company, with its name on televisions and DVD players around the world

ADVERTISEMENT

But the firm’s key moneymakers are actually its Hollywood movie studio and singers such as Alicia Keys and Taylor Swift.

And perhaps its biggest profit generator is something decidedly un-Sony — a financial arm that sells insurance.

Massive losses in electronics kept Sony in the red for years, faced with falling prices and tough competition from lower-cost rivals and more innovative firms such as iPhone producer Apple.

Sony’s PlayStation games console has faced pressure from rivals such as Microsoft’s Xbox, as well as a more recent challenge from cheap, or even free, gaming on smartphones and tablets.

“The problem with Sony now is that it is in the business of making things that have become commodified,” said SMBC Nikko Securities analyst Koki Shiraishi.

ADVERTISEMENT

“Sony’s strengths are many — good designs, brand strength. It has strong technologies… But you need new and innovative technology to lure consumers.”

Sony, like many Japanese companies that came of age in the booming Japan of the 1970s and 1980s, diversified its operations to include seemingly unrelated businesses with few synergies.

Critics say Sony and their once-leading rivals such as Panasonic and Sharp are too big to cope with their more nimble overseas competitors, which has led to years of record losses amounting to tens of billions of dollars.

ADVERTISEMENT

Still, the sector has been wary about slicing up businesses that encompass a vast range of consumer products, from DVD players to washing machines.

Sony has crept back to profitability after four years in the red, but that was mainly due to a restructuring that includes thousands of layoffs and asset sales, including its Manhattan headquarters for more than $1.0 billion.

ADVERTISEMENT

While the firm has long faced pressure to hive off the good from the bad in its business, the idea grabbed headlines last month after US hedge fund billionaire Daniel Loeb called for a spin-off of as much as 20 percent of its entertainment arm.

A US media report this week said Sony’s board had hired investment banks to look at the proposal, which helped push up its Tokyo-listed shares by 2.09 percent to 2,049 yen on Friday. Sony declined to comment on the report.

Sony’s chief Kazuo Hirai has so far resisted calls to slice up the company, saying he wants to drag the TV business into the black and calling the ailing electronics unit part of “Sony’s DNA”.

ADVERTISEMENT

Loeb’s volley marked a rare bid by an overseas investor to penetrate a staid corporate culture in Japan, where big firms are often resistant to change and are largely controlled by institutional shareholders.

Unlike in the US, shareholder activism is not common in Japan although there has been increasing pressure from vocal investors overseas in recent years.

“It’s unlikely that Sony will accept the proposal,” said Seiichi Suzuki, market analyst at Tokai Tokyo Securities.

“This is not the first time Sony has faced a shareholder who said ‘your electronics segment is not profitable so you should try to make money in other areas’.”

ADVERTISEMENT

But, he added, the move did “serve as warning for the board about how it runs the business”.

“It’s important for firms, especially big companies like Sony, to have discussions with shareholders,” he said.

SMBC Nikko analyst Shiraishi disagrees with some analysts’ harsh assessment that the electronics unit is effectively worthless. But he added that Sony would be wise to listen to those who call for it to cut back on areas where it consistently loses money.

Loeb’s proposal, which the US investor said was aimed at unlocking the profit potential of Sony’s entertainment arm, “make sense… but corporate decisions are not made based on immediate benefit and loss”, Shiraishi said.

ADVERTISEMENT

As part of its corporate overhaul Sony has talked about moving into areas with fatter profit margins, including a tie-up with camera and endoscope maker Olympus in a bid to tap the lucrative medical equipment market.

“You might see sales fall, but profitability will improve,” Shiraishi said.


Report typos and corrections to: [email protected].
READ COMMENTS - JOIN THE DISCUSSION
Continue Reading

Breaking Banner

Trump promises to sign Executive Order today to punish Facebook and Twitter after he was fact-checked on two tweets

Published

on

President Donald Trump on Thursday will sign an executive order in retribution for Twitter appending a "get the facts" label on two of his tweets that were not only false but designed to suppress the vote. On Wednesday Trump responded to the new labels by tweeting, “Social Media Platforms totally silence conservatives voices,” which is false, and promising tech companies he would “strongly regulate, or close them down."

Continue Reading

Breaking Banner

Here’s a major risk for coronavirus spread that everyone seems to be overlooking

Published

on

A public health expert warned that the coronavirus can linger in the air and infect others.

Joseph Allen, director of the Healthy Buildings program at Harvard T.H. Chan School of Public Health, told MSNBC's "Morning Joe" that both the Centers for Disease Control and Prevention or the World Health Organization are overlooking airborne transmission and focusing instead on COVID-19's spread through droplets and surfaces.

"This is why you clean and disinfect surfaces, but they've ignored airborne transmission," Allen said.

Continue Reading
 

Facebook

High school wrestling coach posted photo that mocked George Floyd’s death — but insists ‘I’m not a racist’

Published

on

A high school wrestling coach in the town of Spanaway, Washington drew criticism this week after he wrote a Facebook post that mocked the death of George Floyd and defended the police officers involved in the tragedy.

Local news station KOMO reports that wrestling coach Dave Hollenbeck this week posted a photo of himself smiling and giving a thumbs-up signal while another person put their knee on the back of his neck -- a clear reference to the video showing a police officer with his knee on George Floyd's neck shortly before he died.

Continue Reading
 
 
You need honest news coverage. Help us deliver it. Join Raw Story Investigates for $1. Go ad-free.
close-image