Sony rebuffs new call to sell entertainment unit
Sony’s chief executive, Kazuo Hirai, reiterated on Thursday that the company’s music and movie businesses were not for sale, striking a cautious tone on a renewed push by the American activist investor Daniel S Loeb to break up Sony’s sprawling empire.
He added that the company’s board would continue to study the matter.
Speaking to shareholders at Sony’s annual general meeting in Tokyo, Hirai said that movies and music were an indispensable part of Sony’s growth strategy. Loeb’s firm, Third Point, which claims to be one of Sony’s biggest shareholders, has proposed that Sony should partially spin off its entertainment arms and invest the proceeds in its struggling electronics business.
“The entertainment business plays an important role in Sony’s future growth,” Hirai told investors, saying it added critical value to the company and should not be let go. “This proposal strikes at the heart of what kind of company Sony ultimately will become in the future. We intend to take our time in discussing it.”
Hirai’s remarks came after Loeb upped the ante in what is a rare bid to shake up one of Japan’s most storied companies. In a letter sent to Sony’s board on Tuesday morning, Loeb disclosed that Third Point had raised its stake to about 7 per cent, or about 70 million shares, from 6.5 per cent last month, and urged Hirai to take his proposal seriously.
On top of raising capital to help bolster Sony’s electronics strategy, Loeb argues that giving the entertainment business its own board would provide stronger oversight of revival efforts and spending plans. Third Point has also requested a seat on Sony’s board.
But some analysts have questioned the wisdom of spinning off some of Sony’s profitable content businesses — which could cut off much of the company’s access to their profits — while keeping its unprofitable electronics divisions.
An official decision on Loeb’s proposal rests with Sony’s new board, which added three new members on Thursday: Joichi Ito, director of the Media Lab at the Massachusetts Institute of Technology; Eiko Harada, chairman of McDonald’s Japan; and Tim Schaaff, former head of Sony Network Entertainment. Ito also sits on the board of The New York Times Company.
Shareholders present at Thursday’s meeting in Tokyo appeared to side with Hirai’s cautious stance on Loeb’s proposal. Sony looks set for some successes in electronics. Its sleek Xperia Z smartphone is a best seller in Japan and could soon be available in the United States.
Investors are also excited about Sony’s upcoming PlayStation 4 home game console, which won emphatic praise from gamers at the E3 conference last week in Los Angeles. It is also a more powerful machine and less expensive than Microsoft’s Xbox One; analysts have said Sony stands a good chance of winning the next-generation console wars.
Some shareholders seemed skeptical of Loeb’s intentions.
“I don’t get the impression that he’s interested in Sony in the long term,” said Akihisa Ishikawa, 31, who works in publishing in Tokyo and bought Sony shares about six years ago, but has since seen them decline in value. “Is he just out to make a quick buck? If so, Sony is right not to show interest.”