120410_Sony 15 May

Daniel Loeb, CEO of Third Point LLC, Sony’s “largest owner” according to stock holdings, recently delivered a letter to Sony president and CEO Kazuo Hirai. The letter called for Sony to sell as much as 20% of the Sony Entertainment division to increase performance and profits.

The four funds Loeb runs under Third Point are collectively the largest shareholder of Sony, controlling over $1.1 billion in shares, or around 6.5% of the corporation. The proposal would have Sony offer 15-20% of Sony Entertainment to current shareholders to let it “thrive independently with the support of the Sony parent company.”

“Sony Electronics has suffered frustrating results for the past decade, brought about by low margins, persistent losses, and weak returns on capital,” Loeb wrote, in part. “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 also believes as a result, Sony would be able to “reward management” based on divisional perfomance. A Sony representative has stated the while “Sony welcomes investment” and constructive dialogue with shareholders, “the entertainment businesses are important contributors to Sony’s growth and are not for sale.”

(Sources: Polygon, VG247)