Sony Considering Media Division Spin-Off Amidst Sales Target Reduction - The UpStream

Sony Considering Media Division Spin-Off Amidst Sales Target Reduction

posted Sunday Jun 2, 2013 by Nicholas DiMeo

Sony Considering Media Division Spin-Off Amidst Sales Target Reduction

Sony's Kaz Hirai took over as CEO of the company last year and right away announced a revival plan to turn the company around. Sony bought cloud-gaming company Gaikai for $380 million and then a report came out that said the PS3 is the number one player for Netflix streaming. Now, Sony is considering a proposal by Daniel Loeb's Third Point LLC hedge fund, Sony's biggest stockholder, to sell off twenty percent of its media division. This would include some big titles, name and franchises, like the Spider-Man series and platinum recording artist Adele.

Loeb says that this spin-off of sorts would help Sony get out of the red, by giving Sony some extra cash on-hand and potentially giving Sony a 60 percent raise in its stock price. Kaz Hirai said that the "proposal is one that affects a core part of Sony's business and the direction of our management, so the Sony board will give it thorough consideration before replying to Mr. Loeb."

After the company gave its press briefing, the stock price soared to its two-year high, up 5.9 percent in just a few hours, all from the news of a considered semi-restructuring. However, in related news, Sony is seeing a downturn in its camera and smartphone/tablet product categories, and has lowered its target for this fiscal year. The outlooks now stand at $12.7 billion and just over $13 billion, respectively. On the matter, Hirai acknowledged there is still work to be done, saying that, "while there are encouraging signs of change, the revival of our electronics business remains our task."

In the meantime, Sony has brought on Morgan Stanley and Citi to review the spin-off proposal before the company will respond or reply to Loeb. In ending the call this week, Hirai closed with,

It's not going to be an overnight change but I think we're heading in the right direction.

For Sony, it is on its most crucial turning point of the company's existence, with this holiday pitting the PS4 against Microsoft's Xbox One. Sony's future could definitely rely on how well the console sells through the end of the year. If spinning off the media division helps Sony stay afloat with some extra cash, this might also help by giving them some money to spend on advertising the PS4.


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