Some big changes might be in store for Sony, as the company is considering selling and spinning the company’s entertainment division off into its own company, completely separate from Sony’s electronics and hardware divisions .
The plan to split the entertain division off was initially proposed by billionaire Daniel Loeb, who is Sony’s biggest investor. Loeb’s company, Third Point LLC, has invested over a billion dollars into Sony and owns 64 million shares of the company’s stock. Loeb and Third Point believe that Sony’s entertainment division is being held back by the company’s struggling electronics business, saying “”Sony Electronics has suffered frustrating results for the past decade, brought about by low margins, persistent losses, and weak returns on capital… While it is true that Sony has excellent products, such as the PlayStation, Xperia smartphones, and mirror-less cameras, several of Sony’s product lines — e.g., personal computers and DVD recorders — lack scale and provide commoditized products at high costs to secularly challenged markets.”
Loeb’s offer was initially rejected by Sony, and the company’s CEO, Kaz Hirai, emphatically stated that Sony would not sell or spin off its entertainment division, as the company’s future plans are centered around the connection between Sony hardware (Xperia smartphones, Bravia TV’s, and of course, the Playstation) and the content generated by Sony’s various movie, TV, and music studios. Loeb’s proposal would separate the divisions of the company responsible for the production of Sony’s movies, such as the Spider-Man series, and TV shows, such as Breaking Bad, from the rest of Sony.
Despite Hirai not wanting the split to happen, Loeb is still Sony’s majority shareholder, so the company is now considering his proposal seriously. The company’s board of directors is currently debating whether they’ll accept Loeb’s proposal; analysts speculate that while Sony’s directors might not agree with Loeb’s assessment of their company, they may give in to his idea in order to avoid a messy fight with their majority investor. In the meantime, speculation about the possible split has caused the value of Sony’s stocks to rise.
Currently, it’s unclear how this potential change will effect the Playstation, since I’m assuming that it’s reliant on support from both Sony’s entertainment and electronics hardware divisions.
Source: Bloomberg Business Week
