Major Sony investor calls for the corporation to split up

May 14, 2013 8:50AM PDT

By Martin Gaston, News Editor

Daniel S. Loeb says Sony should split its entertainment and electronics businesses.

A major New York hedge fund investor has called for Sony to split its wide-reaching business apart, saying that separating the entertainment division--responsible for blockbuster movies like Skyfall--will allow the PlayStation-owning electronics division to thrive.

 

 

The New York Times reports that the hedge fund of billionaire Daniel S. Loeb, Third Point, has invested stocks worth $1.1 billion into the Japanese electronics giant and is now one of its largest shareholders. Loeb is said to have personally delivered a letter calling for Sony to be split up to CEO Kazuo Hirai on Tuesday.

"Sony has stood for innovative engineering and consumer satisfaction for decades," says Third Point's letter to Sony. "From televisions to gaming consoles to handsets, Sony epitomizes the proud legacy of Japanese manufacturing ingenuity, superior product design, and excellent user experience."

"However, many casual observers would be surprised to learn that while Sony is electronics, much of its current value is derived from a hidden gem--Sony's Entertainment division. Like many conglomerates [Third Point has] invested in previously, Sony has two strong businesses facing different challenges side by side, each obscuring the other's true worth."

"To maximize Sony's overall success, we believe the Company should change the structure of its ownership of Sony Entertainment. Doing so will strengthen Sony by reducing its burdensome debt, thereby providing additional resources and capital to focus on revitalizing the resurgent Sony Electronics."

A Sony spokesperson replied to the letter by saying that the company is "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.”

Hirai is expected to talk about the future of the 67-year-old company next week.

Sony announced earlier this week that it has returned to profitability for the first time in five years.

Somebody already posted this earlier today

That's not a half bad idea. Playstations, Vaios, phones etc are separate to sony music and movies anyway, might as well make it official

but instead Sony is making those parts more unified, making a split would make it that much easy for a Hostile take over?

there is even a method for this very tactic:

"

In business, a corporate raid refers to buying a large stake in a corporation and then using shareholder voting rights to require the company to undertake novel measures designed to increase the share value, generally in opposition to the desires and practices of the corporation's current management. The measures might include replacing top executives, downsizing operations, or liquidating the company.

Corporate raids were particularly common in the 1970s and 1980s in the United States. By the end of the 1980s, management of many large publicly traded corporations had adopted legal countermeasures designed to thwart potential hostile takeovers and corporate raids, including poison pills, golden parachutes, and increases in debt levels on the company's balance sheet.

In later years, corporate raiders have since turned to being "activist shareholders", purchasing equity stakes in a corporation to influence its board of directors to put public pressure on its management."

http://en.wikipedia.org/wiki/Corporate_raid

I think Sony is saying No thank you, many stated Sony should leverage all its entertainment branches by keeping them more involved in the playstation part of the company it will drive the living room dynamic's for the playstation section of the platform to be an all in one entertainment platform for the livingroom, That is what Microsoft and Nintendo are also shooting for as is Samsung, Apple and Google, so why would Sony not want to contest that when the playstation sell over 70 million living room systems, all with the ability to reach those consumer's with not just games but also all entertainemt that Sony offer's.

This is interesting stuff but far beyond my limited knowledge of economics. But from what i understand, this is similar to why Take Two bought 2K (sometime after rockstar games) as it made it extremely valuable and so made it more expensive and risky to buy out. That didn't stop EA from trying to buy it the other year but thankfully that never happened. 

But i guess companies need to succedd to a point that they become to expensive to be bought out and once they make it try to maintain there assets by being profitable. I guess that's the case. 

This could have been an update to the already existing thrwad that posted this already, or in the other two threads talking about it. :)