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Authorities Raid Olympus Offices in Tokyo

TOKYO — More than two months after Olympus’s former president blew the whistle on a huge accounting fraud, Japanese authorities raided the company’s headquarters here Wednesday, emerging several hours later with boxes of documents.

TV cameras crews, tipped off in advance, were in position outside to watch dozens of investigators in dark business suits pour into the building. But it is likely to take more than symbolic action to assure foreign investors that the company will address a scandal that has caused the company’s stock market value to drop by half since early October.

Olympus is said to be looking to raise capital from a domestic investor, a move that would dilute the influence of overseas shareholders, while making fundamental changes less likely.

In fact, some foreign shareholders say the reaction to the scandal is shaping up to confirm overseas investors’ worst fears about Japan Inc.: that entrenched executives will thwart any attempts at reform, with their business-as-usual attitudes given the tacit endorsement of friendly bankers and staid Japanese institutional investors.

The eventual Olympus salvage plan could even be a Japan-wide effort. This week, the Nikkei business daily reported that Olympus might issue about 100 billion yen (about $1.3 billion) in new preferred shares, and that Japanese technology companies like Fujifilm or Sony might be possible buyers. Those two companies, though, denied that any such investment was in the works.

Foreign institutional investors are on edge. “The incumbent board should not be allowed to sell off Olympus’s independence on the cheap to protect its own interests,” an American fund manager, Southeastern Asset Management, said in a statement this week. “Allowing it to do so would deal a severe blow to the reputation of Japan’s capital markets and corporate governance,” said Southeastern, which holds about 5 percent of Olympus shares.

Top Olympus executives acknowledged last month that the company had conducted a decades-long effort to cover up $1.7 billion in investment losses in a global scheme that sparked public investigations on three continents. Last week, Olympus acknowledged some of the losses in five years’ worth of revised statements, which showed shareholders’ equity plunging to just 42.9 billion yen and casting a shadow over the company’s long-term viability.

Three executives implicated in the scheme have left the company. But the rest of the Olympus board has been scrambling to retain control of the company. Backing them are the country’s biggest banks, which hold great sway over top Japanese corporations, serving as major lenders and as major shareholders.

The Sumitomo Mitsui Financial Group is the biggest lender to Olympus with 227.5 billion yen in outstanding loans and bonds, according to Reuters, and also holds a 3.4 percent equity stake in the company. Olympus’s other main lender-cum-shareholder, Mitsubishi UFJ Financial Group, owns a 7.6 percent stake and has also stood by the company’s management.

Together, they are likely to bring in a new domestic investor to inject more capital into the company — a bid to diminish the role of foreign investors in shaping the company’s future, according to several people briefed on the plans. That has caused dismay among foreign shareholders, who say the current management is tainted and should leave, for the sake of robust corporate governance.

It is unclear how many Olympus shares are controlled by overseas investors, but analysts say the proportion could be significant.

Officials at Sumitomo Mitsui and Mitsubishi UJF declined to comment Wednesday.

Any moves by Olympus to inject new equity into the company might also thwart efforts by the whistle-blowing former chief executive, Michael C. Woodford, to return to the company’s helm with a new slate of directors. Mr. Woodford, a British national, was fired in mid-October after he questioned the Olympus board over a series of unusually large acquisition payments that were later found to be part of the company’s cover-up.

Mr. Woodford has said he had enlisted “impressive” members of the Japanese business community to join his prospective board and had outlined his own plans to raise capital, either through private equity or a rights issue.

But working with private equity firms, especially from overseas, may not go down well with Japanese investors, who often see them as vulture funds looking to feast on weak Japanese companies and sell off their assets piecemeal.

Article source: http://www.nytimes.com/2011/12/22/business/global/prosecutors-in-japan-raid-olympuss-headquarters.html?partner=rss&emc=rss

Norio Ohga, Who Led Sony Beyond Electronics, Dies at 81

The cause was multiple organ failure, the company said in a statement.

Mr. Ohga was the principal architect of Sony’s move beyond its stronghold of sleek consumer electronics gear and into music and movies. The biggest steps came when Sony bought CBS Records for $2 billion in 1988 and, a year later, Columbia Pictures for $3.4 billion.

At the time, when Japan Inc. seemed unstoppable, those acquisitions — along with a Japanese real estate company’s purchase of most of Rockefeller Center — were symbols of Japan’s rising economic power and wealth. There was worried talk of the Japanese commercial “invasion” and the loss of American “cultural assets.”

But to Mr. Ohga the goal was a kind of industrial synthesis, marrying Sony’s technical wizardry in electronics with the West’s talent in entertainment. In a statement, Howard Stringer, the current chief executive of Sony, said it was Mr. Ohga’s vision that drove “Sony’s evolution beyond audio and video products into music, movies and game, and subsequent transformation into a global entertainment leader.”

Still, Mr. Ohga wanted to do more than expand Sony’s corporate empire. Linking electronics and entertainment, in his view, would increase the value of each and secure a lucrative future for Sony. “Hardware and software are two wheels on a car,” he explained repeatedly over the years.

There were good years in Sony’s media businesses. But the real payoff from the electronics hardware and the entertainment software, each lifting the sales of the other, proved elusive. When Mr. Ohga spoke of software, industry analysts say, he was thinking of the kind that comes from Hollywood, not Silicon Valley.

The vision Mr. Ohga championed for years, those analysts say, has come to fruition at Apple, in a different guise. That company, they note, has combined beautifully designed devices, like iPods and iPhones, with software for making media easy to consume and buy.

Apple does not own music companies or movie studios, but it controls an online marketplace where media are purchased.

“Sony was a great product company, and Ohga made it better,” said Michael A. Cusumano, a professor at the Sloan School of Management at the Massachusetts Institute of Technology. “But Sony did not really get software or the Internet. That wasn’t Ohga’s domain.”

Born on Jan. 29, 1930, in Numazu, 80 miles west of Tokyo, Norio Ohga grew up in affluence, the son of a wealthy lumber trader. As a child he had pleurisy, an inflammation in the chest, so during the war years he was exempted from working at the nearby military factories, where many Japanese youths labored. Instead, he practiced the piano and took singing lessons.

“By the time I was 18 I knew I wanted to be a vocalist,” Mr. Ohga said in an interview with The New York Times in 1990. “So just after the war, I had to come to Tokyo.”

Mr. Ohga enrolled in the Tokyo National University of Fine Arts and Music, and soon demonstrated his strong voice and his forceful opinions about a tape recorder that had just been introduced by the company that would become Sony. Mr. Ohga wrote a letter to Sony’s co-founder, Akio Morita, detailing the machine’s shortcomings for professional musicians and singers.

Mr. Morita, fascinated by the aspiring opera singer’s technical knowledge, met with him and signed him up as a part-time consultant. In 1954, Mr. Ohga left for West Germany to study music and to start a professional singing career that led to performances throughout Europe and Japan. Yet Mr. Morita kept Mr. Ohga on the payroll and stayed in touch.

In 1957, when Mr. Ohga married Midori Matsubara, a pianist he had met in Germany, Mr. Morita and Sony’s elder co-founder, Masaru Ibuka, attended the wedding.

Mr. Ohga eventually surrendered to Mr. Morita’s persistence. He joined Sony as a full-time employee in 1959.

Article source: http://feeds.nytimes.com/click.phdo?i=0d2eeac1e6e275b3c900eec8d548c9dc

Authorities Raid Olympus Offices in Tokyo

Norio Ohga, Who Led Sony Beyond Electronics, Dies at 81

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