June 23, 2021

DealBook: Sony Board Weighs Breakup Proposal

Kazuo Hirai, chief of Sony, at a corporate strategy presentation in Tokyo on Wednesday.Kimimasa Mayama/European Pressphoto AgencyKazuo Hirai, chief of Sony, at a corporate strategy presentation in Tokyo on Wednesday.

TOKYO – Sony said on Wednesday that its board was considering a proposal from a United States hedge fund to spin off part of its entertainment business, but it emphasized that those discussions were preliminary and that it had not set a timetable for a response.

Sony, under pressure from the hedge fund Third Point, one of its top investors, to unlock more value from its lucrative entertainment divisions, also said it was on track to return its electronics business to profitability this year.

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”We will engage in thorough discussions at the board level to decide on Sony’s response,” the chief executive, Kazuo Hirai, said in response to questions at a corporate strategy presentation. ”It is an important matter that relates to Sony’s core businesses and management, so the board must hold ample discussions.”

Mr. Hirai said board members were already discussing the proposal, even though some of them will be replaced after the company’s annual investor meeting in June. He declined to say when Sony might respond or to give his personal views on the proposal, saying the matter was for the board to judge.

”We are still in early stages,” Mr. Hirai said. ”But we intend to engage positively with our investors.”

Daniel S. Loeb of Third PointPhil McCarten/ReutersDaniel S. Loeb of Third Point.

It is unclear whether Sony will seriously consider the proposal from Third Point’s manager, Daniel S. Loeb, who is pressing the company to spin off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world.

Corporations in Japan, including Sony, have a history of ignoring letters from shareholders calling for similar overhauls, according to a former top investor in Sony.

Mr. Loeb’s hedge fund has acquired a stake of about 6.5 percent in Sony, making it one of the biggest shareholders. In a letter that was made public, he has proposed that Sony use the money raised from the spinoff to reinvest in its ailing electronics business.

Mr. Hirai, who took over as chief executive in April 2012, emphasized that even without such a move, Sony was on track to bring its electronics business back into profitability in the current financial year, which runs through next March.

He said Sony still expected sales of 6 trillion yen ($58.3 billion) from electronics and an overall 5 percent operating profit margin, adding that the company hoped its televisions would squeeze out a profit for the first time in a decade.

”The No. 1 mission assigned to me is to bring change to Sony and to revive our electronics business,” Mr. Hirai said. ”We are on the offensive.”

Article source: http://dealbook.nytimes.com/2013/05/22/sony-board-considers-breakup/?partner=rss&emc=rss

DealBook: Hedge Fund Manager Loeb Targets Sony for a Breakup

Daniel S. Loeb's hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony.Steve Marcus/ReutersDaniel S. Loeb’s hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony.

3:42 a.m. | Updated

An American hedge fund billionaire known for starting big fights has called for a breakup of the entertainment and electronics colossus Sony, according to people briefed on the matter, possibly setting off a battle that could roil Japan’s famously staid corporate culture.

The call, which came on Tuesday, will most likely be viewed by government officials and corporate leaders in Tokyo as a shot across the bow from Wall Street, just as Western investors begin piling into Japanese stocks.

The hedge fund manager, Daniel S. Loeb, is pressing Sony to spin off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world, responsible for movies like “Skyfall” and artists like Taylor Swift.

Mr. Loeb — known for ousting Yahoo’s former chief executive and luring Marissa Mayer away from Google to run the company — also signaled that he would accept a seat on Sony’s board.

His hedge fund has quietly amassed a stake of about 6.5 percent in Sony, making it one of the biggest shareholders. The holding, made up of stock and derivatives, is valued at about $1.1 billion.

Still, even big Japanese investors have often faced resistance in seeking changes at companies, a hurdle that may be significantly higher for a foreign hedge fund manager.

A spokesman for Sony, Shiro Kambe, said in a statement that the company welcomes investments. “We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the stable business foundations of the entertainment and financial services businesses,” he said.

But Mr. Kambe also pointed to repeated assertions by Sony’s chief executive, Kazuo Hirai, that Sony Entertainment contributes significantly to the overall company and is not for sale. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy,” he said.

Mr. Loeb, 51, the founder of the hedge fund Third Point, flew to Tokyo this weekend for three days of meetings with government officials, regulators and senior Sony executives, according to people briefed on the matter. He hand-delivered a letter on Tuesday to Mr. Hirai that praised a turnaround effort but asked for more.

“So while Third Point supports your agenda for change, we also believe that to succeed, Sony must focus,” Mr. Loeb wrote in the letter, which was reviewed by The New York Times.

After the meeting, the hedge fund manager told associates that he was impressed by Mr. Hirai and supported management, according to a person briefed on the matter.

Mr. Loeb said he believed that spinning off a portion of the entertainment business to Sony shareholders could sharpen the company’s focus and lead to higher profit margins, while helping to revive the core electronics business. He has also contemplated a potential spinoff or sale of other operations, including Sony’s insurance division, which accounted for much of the company’s profit last quarter.

The campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a so-called lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as prime minister has promoted policies meant to attract private investment. Mr. Loeb is betting that Mr. Abe will expand deregulation.

“Under Prime Minister Abe’s leadership, Japan can regain its position as one of the world’s pre-eminent economic powerhouses and manufacturing engines,” Mr. Loeb wrote in his letter.

Despite its decade-long slump, Sony, the 67-year-old electronics pioneer, remains one of the most prominent companies in Japan, with a market value of roughly $18 billion.

Still, Mr. Loeb has plenty of ammunition. Shares of Sony have plunged nearly 85 percent over the last 13 years. The company long ago ceded its crown as the king of cool electronics to Apple, and its dominance in televisions was eroded by the emergence of Korean rivals like Samsung and LG.

Last week, Sony reported its first annual profit in five years. But it reached that milestone thanks largely to the weakening yen and some belt-tightening, including the consolidation of businesses and the sale of its American headquarters.

Sony’s chief executive, Mr. Hirai, is scheduled to make a presentation about the company’s turnaround plan next week. He has argued that despite having come late to the era of digital media, the company that made the Walkman, the Trinitron television and the PlayStation can rebound.

To Mr. Loeb, more must be done, starting with the spinoff of Sony Entertainment. Though the division accounts for more than 40 percent of the company’s enterprise value, he said in his letter that it needed discipline to raise its profit margins. Mr. Loeb estimated that a partial spinoff of the entertainment business could bolster Sony’s share price by as much as 60 percent.

In his letter, Mr. Loeb proposed handing 15 to 20 percent of Sony Entertainment to existing shareholders. His firm would be willing to backstop the initial public offering up to $2 billion to ensure its success.

Other underappreciated assets include the company’s 60 percent stake in Sony Financial, which largely sells life insurance policies, as well as real estate holdings and stakes in other companies. And Mr. Loeb is expected to argue that Sony’s electronics division must sharply reduce costs, including by taking a cue from its protégé, Apple, in focusing on a few core products.

Mr. Loeb has recently expressed his interest in Japan. Referring to the changes by the Abe government, he called it “a huge game change” at an industry conference last week. “And there’s a lot more room to go,” he added.

Mr. Abe has called his revival effort a plan of “three arrows,” including aggressive monetary easing by the Bank of Japan and enormous stimulus spending by the government.

So far, that effort appears to have drawn investor plaudits. The yen weakened in value last week, to 100 to the dollar, a level unseen in four years, helping local companies like Sony and Toyota. And the Nikkei 225-stock index has risen 43 percent so far this year. At the same time two years ago, the Nikkei was down 5.7 percent.

Shares in Sony rose 1.2 percent in Tokyo on Tuesday, while the Nikkei closed down 0.16 percent.

But it is the third arrow that has Mr. Loeb’s attention. The Abe government hopes to shed Japan’s reputation as a land of strict hierarchy and bureaucracy. Business mistakes were often seen as shameful, and outright confrontation largely disdained.

“There’s an entrenched management culture there,” said Lawrence B. Lindsey, a former top economist in the administration of President George W. Bush. “Activists aren’t particularly popular here among management, and they won’t be popular in Japan either.”

No less than Howard Stringer, Sony’s own chairman, has criticized the status quo.

“Japan is a harmonious society which cherishes its social values, including full employment,” he said in a speech last year. “That leads to conflicts in a world where shareholder value calls for ever greater efficiency.”

Yet there have been changes. The percentage of foreign ownership in companies on the Tokyo Stock Exchange nearly quintupled, to 24 percent, from 1990 to 2008. And Japanese shareholders have increasingly adopted the aggressive tactics of Western fund managers.

Sony is the biggest bet yet for Mr. Loeb, an intense California native who built his name largely upon acidly written letters, berating targets for mismanagement and calling for change.

The strategy has proved profitable. Third Point’s returns are up 13.3 percent this year and up 2.6 percent for the first week of May. Forbes estimates Mr. Loeb’s net worth at about $1.5 billion.

Perhaps the most prominent victory has been Third Point’s investment in Yahoo, where Mr. Loeb pushed for the dismissal of a chief executive after exposing the executive for falsifying academic credentials.

Mindful of Japanese decorum, however, Mr. Loeb strikes a more conciliatory tone in his letter to Mr. Hirai of Sony. His calls are couched as suggestions aimed at improving the company, rather than aggressive demands.

“Third Point would not have made this substantial investment if we did not believe in a bright future for Sony’s global brand, superior technology, and dedicated employees,” he wrote. “We are confident that by acting as partners, Sony will grow stronger.”

Hiroko Tabuchi contributed reporting.

Article source: http://dealbook.nytimes.com/2013/05/14/hedge-fund-manager-daniel-loeb-targets-sony-for-a-breakup/?partner=rss&emc=rss

Sony’s Chairman, Howard Stringer, Announces His Retirement

He announced his departure on Friday in New York during a speech at the Japan Society, and Sony, in Tokyo, confirmed the news on Sunday. He will step down at an annual general shareholders meeting.

Mr. Stringer, a Welsh-born American and 15-year employee at Sony, became president and chief executive in 2005, when the once glorious maker of the Walkman music player was starting to get overwhelmed by the flashier Apple and the nimbler Samsung Electronics.

The company, which makes the PlayStation 3 game console as well as “Spider-Man” movies, is still struggling. It has lost money for the last four years and recorded the biggest loss in its 67-year history for the fiscal year ending in March 2012.

Mr. Stringer said he was ready to retire after turning over the helm last year to Kazuo Hirai. Mr. Stringer groomed Mr. Hirai, longtime head of Sony’s video-game unit, who led its relative success as a brand in the American market, to be his successor as chief and president.

“I was pleased to hand the reins to Kazuo Hirai last year because I saw in him the right mix of skills to lead Sony, and I knew it was the right time to bring about generational change,” Mr. Stringer said in the speech. “Over the course of the past year, he has come into his own and is leading Sony with vision and authority.”

Mr. Stringer said he would remain busy with charity work in education and medicine, and would continue as chairman of the American Film Institute.

Before joining Sony in 1997, Mr. Stringer had a 30-year career as a journalist, producer and executive at CBS. His main role was considered to be developing strategic links between the entertainment and electronics business, a plan Sony has pursued for years but is still not fully realized.

Sony has recently introduced smartphones and other products to good reviews. But it is still losing money in its core television-manufacturing unit.

Article source: http://www.nytimes.com/2013/03/11/business/sonys-chairman-howard-stringer-announces-his-retirement.html?partner=rss&emc=rss

Sony Says Parts of PlayStation Network Will Be Back Online This Week

TOKYO — Sony said Sunday that parts of its PlayStation Network would be back online this week after hackers infiltrated the service, made off with detailed personal information about users and forced a catastrophic system shutdown.

But a full rebooting of the network, which links 77 million game players worldwide, could take until the end of the month, the Japanese electronics and entertainment company announced at a news conference in Tokyo.

“I am deeply sorry for worrying, and inconveniencing, our users,” Kazuo Hirai, Sony’s executive deputy president, said, bowing deeply.

The security debacle has dealt a serious blow to Sony’s bid to build an online network that brings games and music content to its universe of gadgets. Sony has trailed in building an online presence behind companies like Apple and its popular services, iTunes and the App Store.

Sony has also faced questions about whether it moved quickly enough to inform its users of the breach. The PlayStation Network went down April 20, but Sony did not disclose that personal data had been stolen until a full week later.

A subcommittee of the U.S. House of Representatives has sent a letter to Sony asking for information about the attack. Among its questions are when the intrusion occurred, whether Sony knew who was responsible and when the company had notified law enforcement agencies.

According to Sony, an “unauthorized person” hacked into Sony servers last month and obtained personal information on PlayStation and Qriocity account holders, including their names, addresses, e-mail addresses and user names and passwords for the PlayStation Network.

The company said that other information, including credit card numbers, might have been involved, warning customers to “remain vigilant” by monitoring for identity theft or financial losses.

The hacker attack focused on Sony severs on three days in mid-April, Mr. Hirai said. The company first became aware of the intrusion April 19 and shut down its servers the following day.

Sony said that user names and passwords to the network had not been encrypted but that the credit card information it had for about 10 million users had been and that there was yet no evidence that those data had been taken.

The company is working with the F.B.I. in the United States and with law enforcement agencies in other countries in investigating the attack, it said.

Mr. Hirai acknowledged that Sony had been slow in providing information on the network breach to its users. It took the company time to gather accurate data on the breach, he said.

“Inspecting and analyzing a vast amount of data unfortunately took a lot of time,” he said. “We wanted to make sure that the information we provided was accurate as possible.”

Mr. Hirai said that online networks would remain central to Sony’s business. The new Qriocity service, which streams audio and video content to Sony’s high-end televisions, Blu-ray players and other Web-enabled devices, was also knocked offline in the attack.

Once the network is up and running, users will have to change their passwords before they can connect. Sony will offer free content and other giveaways as part of an “appreciation program,” the company said.

Many features will be back up this week, but the PlayStation Store, where users buy games, movies and other downloadable content, will not be available until later this month, Sony said.

“Sony continues to place utmost priority on its network strategy,” Mr. Hirai said. “We intend to continue our global expansion.”

Article source: http://www.nytimes.com/2011/05/02/technology/02sony.html?partner=rss&emc=rss