United States hedge fund billionaire Daniel Loeb has proposed to split Sony’s music and film businesses from its electronic operations, as the need for new profitability schemes is emphasised.
Having expanded its primary electronic ventures to the entertainment scene, Sony is now making its mainstream revenue from Hollywood film studios and pop singers.
Loeb’s suggestion to divide the business sections involves a 20 per cent separation from its entertainment income.
Electronics has for a while now not been enough to keep Sony out of debt as rivals such as Apple and Microsoft challenge the company’s products with the likes of the the iPod and the Xbox.
Koki Shiraishi, SMBC Nikko Securities analyst, said: “The problem with Sony now is that it is in the business of making things that have become commodified,”Agence France Presse reported.
He added: “Sony’s strengths are many — good designs, brand strength. It has strong technologies… But you need new and innovative technology to lure consumers.”
Investment banks have reportedly started investigating the proposal, which has an evidently positive effect on the shares with 2.09 per cent on Friday, May 31, as listed in Tokyo.
Kazuo Hirai, chief executive officer (CEO) at Sony, has resisted suggestions of division, revealing his plan to move into the television space and bring back “Sony’s DNA” of electronic legacy.
According to Seiichi Suzuki, market analyst at Tokai Tokyo Securities, it is more likely for Sony to reject the proposal.
“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’,” Suzuki said.
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.
Other strategies under discussion include partnerships with camera and endoscope company Olympus to enter the medical equipment market.
