Sony cut its sales targets for digital cameras, smartphones and tablets for the year to end-March 2015, sees signs of a revival in its electronics business and its board will discuss a proposal by U.S. hedge fund manager Daniel Loeb to spin off up to 20 percent of its movie, TV and music division.
CEO Kazuo Hirai on Wednesday said that Sony would assess a proposal from its biggest shareholder, billionaire Daniel Loeb's Third Point LLC hedge fund, that the group should sell up to a fifth of its music and movies business.
Loeb argues a partial spin-off of Sony Entertainment would free up cash to help the struggling electronics division and could boost Sony's stock price by 60 percent.
Third Point's "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," Hirai said.
"While there are encouraging signs of change, the revival of our electronics business remains our task," Hirai said. He said Sony was keeping to its strategy to revive the struggling business around cameras and mobile and PlayStation gaming devices.
In the smartphone and tablet businesses, where continued market growth is anticipated, Sony will aim to achieve further business growth while also enhancing profitability. The company intends to accelerate the speed with which it develops and delivers compelling products that incorporate the Sony's technologies, and to further elevate the mobile "Watch," "Listen" and "Create" experiences. Sony aims to achieve sales of 1.5 trillion yen and operating income margin of 4% in its mobile business, comprising smartphones and tablets, by the fiscal year ending March 31, 2015 (FY14). Regarding PCs, in view of the changes the market and business environment have undergone in the past year, the company is implementing a strategic realignment that initially prioritizes profitability improvement over sales expansion with the aim of returning the business to profit in FY13.
Placing image sensors, a particularly strong category for Sony, at its core, Sony is concentrating the focus of its imaging businesses on creating value-added products, while aggressively exploring new applications for its imaging technologies in both the consumer and professional markets. In terms of image sensors, Sony will continue to commercialize new sensor technologies capable of differentiating finished products, for use in a range of consumer and professional applications. The company also plans to engage in aggressive capital investment in order to meet the demand for these components. At the same time, Sony is also developing technologies that further expand the range of sensor applications, including sensors capable of sensing beyond the visible light spectrum, and sensors capable of detecting and categorizing different types of information. For the professional market, Sony will continue to reinforce its professional camera lineup centering on 4K-compatible cameras, as well as cameras for cinematography. The company will also target further business growth by extending the scope of its digital imaging technologies to new business areas such as security, sports and medical, and will reallocate resources accordingly. In the consumer market, where business conditions continue to shift rapidly, Sony aims to expand sales of value-added compact digital still cameras by introducing models that leverage Sony's image sensor technologies to further enhance image quality, and also incorporate feature enhancements such as reduced size and weight, and higher-powered zoom. Sony will also seek to maintain its number one global market share in the growing mirrorless lens camera category. Through these measures, Sony will target sales of 1.3 trillion yen and an operating profit margin of more than 10% across the image sensor, professional, and consumer categories by FY14.
"PlayStation 3" continues to deliver stable hardware and software sales, and Sony will continue to reinforce the business' position as a stable source of profit. Sony will seek to grow sales of content and services through PlayStation Store and contribute to profit. For "PlayStation Vita" (PS Vita), the company will aim to secure further sales and profit through various hardware sales initiatives and the introduction of software titles. The next generation platform, "PlayStation 4" (PS4) will launch this year-end holiday season. PS4 will deliver a quality gaming experience only possible through a dedicated gaming system, and will also enable smartphone and tablet users to share in the enjoyment of PS4, even without owning one themselves. Furthermore, Sony says that users who own both PS4 and PS Vita will be able to experience new services and game entertainment. Sales of digital downloads are increasing rapidly as the delivery of game content transitions from disc media to sales over the network. The company is also working towards streaming PlayStation games by leveraging the cloud technologies of Gaikai Inc., acquired last year. This would enable the PlayStation experience to be enjoyed across a wide range of products, providing significant opportunities for further business expansion. Sony will target sales of 1 trillion yen and operating income margin of 2% in the game business in FY14. Going forward, Sony aims to significantly expand its business model around PS4, to transition the business to further growth in the fiscal year ending March 31, 2016 (FY15) and beyond.
The mobile, imaging and game businesses will continue to be the core businesses that drive Sony's electronics business growth. Sony is projecting that approximately 65% of total sales and approximately 80% of operating income for the entire electronics business will be generated by these three businesses by FY14.
Within the TV business, Sony is continuing to enhance product strength in order to increase sales and product value. By incorporating Sony-developed features such as the "X-Reality PRO" image processing engine and "Triluminos Display" wide color displays, Sony will continue to enhance the image and audio quality of its Full HD TV models, while also expanding its 4K LCD TV lineup. In addition, in emerging markets where continued growth is expected, Sony will launch models tailored to meet local needs in order to increase sales volumes, while also continuing to reduce fixed and operational costs in order to return the business to profit in FY13.
In the Entertainment businesses, the Pictures segment is aiming to focus on the production of motion picture titles with high profit potential, including globally popular franchises, and will seek to further develop its television production and television network businesses, which are areas where continued growth is anticipated, as stable sources of profit.
In the television network business, Sony will target further business expansion in rapidly growing markets such as India.
In the Music segment, the company aims to increase market share by unearthing new talent, and also exploring various growth opportunities such as leveraging its music content for use across increasingly popular online music service platforms, in order to achieve further business growth.
In the music publishing business, which manages music publishing rights, Sony/ATV Music Publishing LLC began administering EMI Music Publishing's global music catalog, starting in June of 2012. The company plans to solidify its position as the top player in the industry through efficient management and strong creative decisions.
As a result of these measures, by FY14 Sony aims to achieve the financial targets announced by the company on April 12, 2012, which are sales of 8.5 trillion yen, operating income margin of more than 5%, and return on equity ("ROE") of 10% for the Sony Group overall, and sales of 6 trillion yen and operating income margin of 5% in its electronics business.