Sony Corp. (6758) Chief Executive Officer Kazuo Hirai, under pressure to sell a stake in the company’s entertainment business, said turning around the struggling consumer electronics operation is his biggest priority.
“I don’t worry about the entertainment business, it’s doing just fine,” Hirai said yesterday in an interview at Allen & Co.’s annual conference in Sun Valley, Idaho. “Electronics is what needs the most work.”
Investor Daniel Loeb’s Third Point LLC hedge fund is pressing Hirai to sell a stake in Sony’s movie and music businesses in an initial public offering, to increase the Tokyo-based company’s stock price. Hirai has emphasized the need to fix the business that makes TVs, phones and laptops, while the Sony board is reviewing Loeb’s proposal.
Hirai, who is attending the Sun Valley conference with Michael Lynton, CEO of Sony Entertainment, said he doesn’t consider the event as a place to negotiate deals. Instead he networks and collect business cards.
Hirai pledged to investors in June he will take bolder measures to revive the electronics operation, which is losing money in TVs and smartphones. Sony’s main TV business posted nine straight annual losses for a total of 762 billion yen ($8 billion).
Without the contributions of profitable entertainment and insurance businesses, Sony would have booked 130 billion yen in losses in the year ended March 31.
Television manufacturing and the marriage of music and video to mobile devices are big areas of focus at Sony, Hirai said in the interview.
Loeb’s Third Point increased its stake in Sony last month. Funds controlled by Third Point own 70 million shares through direct ownership and cash-settled swaps, according to a June 17 letter from the investor to Hirai obtained by Bloomberg News. That equals about 6.9 percent of the Tokyo-based company’s shares on issue.
The company is regaining its edge with the new PlayStation 4 game console and Xperia smartphones, Loeb said at the time. A “semi-independent governance structure” would help Sony by making managers more accountable and allowing for better decisions on allocating capital, he said.
Sony’s motion picture unit, which includes the Columbia studio, accounted for 26 percent of operating income in the year ended March 31, while the music division featuring Adele and Bruce Springsteen represented 20 percent, according to data compiled by Bloomberg.
Media stocks are near all-time highs on optimism that producers of films and television shows will weather a decline in home-video revenue by selling content to newer players like Netflix Inc. (NFLX:US) and Amazon.com Inc. (AMZN:US)
Amazon yesterday announced an expanded agreement with Miramax to bring “hundreds” of titles to its Prime Instant Video streaming service, including “Pulp Fiction” and “Good Will Hunting.”
Sony American depositary receipts closed little changed at $21.77 yesterday in New York. They have almost doubled this year. The Standard & Poor’s 500 Media Index of 16 stock has advanced 26 percent this year, compared with 16 percent for the wider S&P 500.
Howard Stringer, Sony’s former chairman and chief executive officer, who is also attending the Sun Valley conference, declined to comment on Loeb’s proposal, except to say he helped Sony extend its push into entertainment.
“I put those businesses together,” Stringer said.
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