Bloomberg News

Sony Rises on Optimism Hirai Will Rebuild Company: Tokyo Mover

February 05, 2012

Feb. 3 (Bloomberg) -- Sony Corp. jumped the most in more than 10 months in Tokyo trading after incoming Chief Executive Officer Kazuo Hirai said he will close down some underperforming businesses to help revive the unprofitable company.

The shares jumped as much as 8.9 percent, the biggest intraday gain since March 16, to 1,446 yen. They ended the morning session of trade at 1,427 yen, up 7.5 percent.

The maker of Walkman music players, Cyber-shot cameras and PlayStation 3 game consoles will close less-competitive businesses and review its portfolio, Hirai, who will replace Howard Stringer as CEO on April 1, told reporters yesterday. Sony more than doubled its full-year loss forecast yesterday to 220 billion yen ($2.9 billion), blaming a stronger yen, cuts in production caused by floods in Thailand and the cost of exiting a display-panel venture with Samsung Electronics Co.

“The shares are rising on expectations that the company will be on track for rebuilding,” Makoto Sengoku, a market analyst at Tokai Tokyo Securities Co., said by phone. “All the bad factors have already been reflected.”

Sony can reward shareholders by narrowing its portfolio, Hirai said in his first meeting with reporters after being named to lead the company. He didn’t elaborate. Hirai said he will present his business plans later, though he reaffirmed his commitment to TVs.

‘Step Forward’

“Unless we steer drastically toward reform, we may confront a situation where decision-making comes with enormous pain,” Hirai said yesterday in his first interaction with reporters after he was named to lead the company. “If we hold back, we cannot take a step forward.”

The world’s third-largest maker of televisions may project an operating profit of about 200 billion yen in the fiscal year that starts in April as the company won’t repeat one-time costs that hurt profits this year, Chief Financial Officer Masaru Kato said yesterday.

This year, Sony had one-time losses of about 70 billion yen because of Japan’s March 11 earthquake, as much as 70 billion yen because of the Thai floods, and 63 billion yen from the sale of its stake in the Samsung venture, Kato said.

Hirai, 51, who worked in Sony’s music and entertainment divisions, established his reputation by turning around the PlayStation unit and edged out three other candidates with engineering backgrounds for the top job. Stringer, 69, will become chairman of the board after a shareholders meeting in June, Sony said earlier this week.

‘Sense of Urgency’

“We weren’t able to select areas where we want to concentrate, so we ended up keeping products that became commoditized,” Hirai said. “We want to make our focus clear soon.”

During a joint news conference yesterday, Hirai reaffirmed his commitment to TVs. The world’s No. 3 maker is maintaining a sales target of 20 million sets, though the business may lose between 220 billion yen and 230 billion yen, including the cost of exiting the venture with Samsung, Kato said.

“Hirai shared a sense of urgency by commenting that the company will act quickly once a decision has been made by a unified management, it will make painful decisions, and that Sony has no time to spare,” Yuji Fujimori, a Tokyo-based analyst at Barclays Plc, wrote in a note to clients today. “Next is the company’s execution ability.”

--With assistance from Mariko Yasu in Tokyo. Editors: Anand Krishnamoorthy, Terje Langeland

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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