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Sony CEO Kazuo Hirai says 'absolutely no plan' to sell TV business

Sony CEO Kazuo Hirai says 'absolutely no plan' to sell TV business

By Reuters | Updated: 6 February 2014 21:46 IST

Sony Corp Chief Executive Offer Kazuo Hirai is seeking to cure a TV business that has lost $7.8 billion over a decade by isolating it to speed up decisions on future strategy.

Hirai is spinning off TV operations into a separate business in the latest attempt to fix a division that he says for now remains central to the Japanese electronics maker. It's part of a broader restructuring: Sony also confirmed on Thursday it will sell its Vaio personal computer division, effectively ending 17 years in that business.

Sony said charges associated with the moves will combine with weaker showings than it expected in mobile phones, TVs and PCs to pitch it into a net loss this fiscal year of 110 billion yen. The maker of Bravia TVs and Playstation game consoles will cut 5,000 jobs - just over 3 percent of its global staff - as a result of the shakeup, counting on saving 100 billion yen in annual fixed costs.

Two years into the job, Hirai's gambit comes as Japan's electronics firms struggle to compete with deep-pocketed industry giants like Apple Inc and Samsung Electronics Co that dominate sales consumer gadgets like smartphone and tablet computers. Local peers Panasonic Corp and Sharp Corp are ahead of Sony on restructuring - the Vaio sale marks the first time Hirai has pulled a major consumer product line.

Speaking to reporters in Tokyo, Hirai said spinning the TV unit off into a wholly owned subsidiary did not mean a disposal is imminent. "If you are asking if we have any plan to sell off our TV business, I can say we have absolutely no plan to do so right now," he said.

But the CEO underlined that while he believes he can restore the company to lasting profit, it has to change. "I think we are heading in the right direction, and by making it a separate company we will speed decision-making up. As for the future, there are many possibilities, and not just for our TV business."

Having previously forecast a net profit of 30 billion yen for the current fiscal year, Sony is now heading for its fifth net loss within six years. The profit recorded in the year ended March 2013, Hirai's first in charge, was helped by the sale of two landmark properties in New York and Tokyo.

(Also see: Sony in talks to sell Vaio PC business to investment fund: Report)

The company has come under fire from investors like Third Point's Daniel Loeb for failing to maximize value in some of its business lines. The comparison with Panasonic is on the surface unflattering: The rival has already swallowed expensive restructuring charges in a recovery from losses of $15 billion loss over two years to March 2013 to a forecast net profit of 30 billion yen this year.

"On the face of it, this is a positive development for Sony, but it's too early to say whether these measures will be enough," said Masashi Oda, chief investment officer at Sumitomo Mitsui Investment Trust.

"Timing is important. It depends on how fast they're able to carry out their intentions," he said.

Three pillars
The domestic Vaio PC division will be sold to investment fund Japan Industrial Partners, which will set up a separate company to take over the operations. Financial terms of the sale weren't disclosed, but Sony will initially hold a 5 percent stake in that company.

The TV operations will be spun off into a separate unit by July 2014, Sony said. The job cuts - mostly outside Japan - are to be implemented by March 2015, with cost savings are to kick in by the 2015-2016 financial year, Sony said. The company said it had total staff of 145,800 at the end of last September.

Sony officials said they expect to lose another 25 billion yen on TVs this year. Having last turned an annual operating profit in TVs in the 12 months ended March 2004, losses for the 10 fiscal years through March 2014 add up to 786.9 billion yen.

(Also see: Sony announces sale of Vaio PC business to Japanese investment fund)

The three pillars that Hirai identified as central to the rebirth of Sony's electronics division - imaging, gaming and mobile - remain uncertain bets for growth in the highly volatile consumer markets, analysts say.

Sony cut its smartphone sales forecast to 40 million from 42 million, citing weakness in Asia and Europe. Hirai has said that he would like to double unit sales of its Xperia handsets by 2015, but the lack of a contract with a major U.S. carrier and a proliferation of low-cost Chinese smartphone makers are seen as obstacles to that growth.

But the latest iteration of its popular video game console, the Playstation 4, has seen strong sales. It's on track to beat guidance of 5 million console sales by the end of March, having reached 4.2 million at the end of December

Still, expensive development costs left Sony warning it will take at least two years to break even on the console.

Sony also slashed its full-year operating profit forecast to 80 billion yen on Thursday from the 170 billion yen it previously expected. But buoyed by a strong performance in its financial services unit in the October-December quarter, Sony posted an operating profit for the three months of 90.3 billion, almost double the previous year and beating a consensus estimate of 71.9 billion yen according to Thomson Reuters.

© Thomson Reuters 2014

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