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Sony investor wants to break up firm, re-invest in hardware biz

Loeb's masterplan calls for IPO of entertainment arm

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Sony’s biggest shareholder wants to break up the firm, spinning off its highly profitable entertainment division to generate more cash to plough into its misfiring hardware biz.

Activist investor Daniel Loeb and his hedge fund Third Point has a 6.5 per cent stake in the venerable electronics giant, amounting to a whopping $1.1bn.

While applauding CEO Kazuo Hirai’s efforts to turn the ailing Japanese firm around, he outlined radical additional steps in a bold letter apparently hand-delivered to the Sony boss.

The centrepiece of Loeb’s grand plan is as follows: “Take public a 15—20 per cent stake in Sony Entertainment, allowing it to thrive independently with the support of the Sony parent company while increasing capital to revitalise Sony Electronics”.

Loeb said Third Point will stump up ¥150bn-¥200bn (£978m-£1.3bn) to support the IPO of the “hidden gem” of Sony Entertainment – home to world class musicians and lucrative Hollywood movie franchises.

He also wants Sony to sell its 60 per cent stake in insurance arm Sony Financial, moves which would effectively slim the firm down to its core hardware business, including PlayStations, cameras, TVs and Xperia smartphones.

While Loeb declined to detail exactly how he would use the extra cash to turn Sony Electronics around, he argued the business has suffered from a lack of focus, claiming its PC and DVD product lines “lack scale and provide commoditised products at high costs to secularly challenged markets”.

“Sony’s Image Sensor business is large, rapidly growing, and profitable, but its contribution is masked by loss-making legacy semiconductor businesses,” he added.

Despite the bold intent, it’s unlikely that Hirai will go for such a major shake-up, given his stated aim has been to turn Sony into an Apple-like business that can provide users with content and hardware to consume it on.

Sony sent the following unequivocal response by way of a statement, to Reuters:

The entertainment businesses are important contributors to Sony's growth and are not for sale. We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.

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