Where Is Sony's Enforcer? CEO Clings to Mobile Despite Loss
Where Is Sony's Enforcer? CEO Clings to Mobile Despite Losses
(Bloomberg) -- Sony Corp.’s turnaround over the past decade was built on hard-nosed accountability and the willingness to close troubled businesses. Indeed, Kenichiro Yoshida was elevated to chief executive officer because he acted as the company enforcer when he was finance chief.
But Sony’s latest move has some investors wondering what happened to the old Yoshida. The Tokyo-based company said Tuesday it will combine the struggling Xperia mobile business with its television, audio and camera operations into a single division. Analysts are concerned that will make it harder for investors to see losses in the smartphone unit, which has long struggled against Apple Inc. and Samsung Electronics Co.
The move comes after investors have complained for months that Yoshida should get rid of the Xperia business. Shares plunged to a 17-month low last week after Jefferies’ Atul Goyal became the latest analyst to downgrade the company, citing worries over mobile losses. The latest move will buy Yoshida more time, but analysts say it won’t resolve the underlying problems.
“By hiding the mobile-related losses, they would take the pressure off from shareholders to shut the division down,” Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte, said in a note to clients. “Nevertheless, the losses are bound to rise further.”
Sony pushed back on the idea that it wants to hide Xperia losses. It will disclose results for that division "for the foreseeable future," said spokesman Takashi Iida. The company will provide more details about its disclosure policy on Apr. 26 when it reports the latest results.
"Through more cooperation among our divisions, we can create new value by better utilizing the combined assets and personnel in our electronics area,” Iida said. “More interaction among employees will also lead to the development and growth of our staff."
The Xperia business has lost 101 billion yen ($913 million) over the past four quarters, compared with operating profits of 82 billion yen at its TV and audio division over the same period, and 89 billion at its camera unit. Yoshida has rebuffed pressure to get rid of the unit, saying it’s vital for pushing innovation including 5G-related research.
The restructuring will create a new division called Electronics Products and Solutions and is scheduled to go into effect from April 1. That would mark the first major reporting overhaul since 2012, when previous head Kazuo Hirai split the consumer electronics unit into individual parts in a bid to boost transparency.
Sony shares closed little changed at 4,765 yen after the announcement. The stock has dropped 11 percent this year, compared with a 7.7 percent gain for the broader Topix index.
“Sony’s unwillingness to exit Smartphones is a disappointment and a strategic mistake, in our view,” Goyal wrote in his report last week. The analyst cut his buy rating for the first time in five years and slashed his price target to 5,500 yen from 8,500 yen.
To contact the reporter on this story: Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net
To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Peter Elstrom
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