Sony's Hirai, Architect of Tech Giant's Turnaround, to Retire

(Bloomberg) -- Sony Corp. Chairman Kazuo Hirai, the architect of a turnaround at the once-dominant Japanese electronics giant, will retire in June after spending more than three decades at the company.

The 58-year-old, who ceded the role of chief executive officer to Kenichiro Yoshida in April 2018, will continue to advise the company after his retirement, Sony said in a statement. Shuzo Sumi of Tokio Marine Holdings Inc. was nominated to become chairman of the board.

Hirai, who took over as CEO from Howard Stringer in 2012, turned the company’s fortunes around by paring back and refocusing its operations. With Yoshida’s support, Hirai sold off the Vaio personal computer business, reshaped the television set unit and pulled the mobile business back from a destructive fight for market share. He also invested heavily in the PlayStation games business and image sensors used in smartphones, now major drivers of the business. Profits hit a record last year as he ceded the CEO role.

“He’ll be remembered as the guy who turned it around and got Sony back in the black,” said Yasunori Tateishi, the author of two dozen books about Japan’s electronics industry, including several critical of Sony. “And then he left at the very top.”

Shares rebounded during his tenure as the company’s finances improved. The stock tripled during his years as CEO, about double the return of the benchmark Topix index. Shares were little changed Friday after the announcement.

“Since passing the baton of CEO to Yoshida-san last April, as chairman of Sony, I have had the opportunity to both ensure a smooth transition and provide support to Sony’s management,” Hirai said in Thursday’s statement. “As such, I have decided to depart from Sony, which has been a part of my life for the past 35 years.”

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Hirai began his career in Sony’s music division in the 1980s, where he performed legal work and then promoted Japanese musicians in the U.S. “I thought [being] in the record business was a nice combination of what I wanted to accomplish, to be in the creative industry but not part of the creative process,” he told the Financial Times in 2016.

He introduced the slogan of “kando,” which in Japanese means to trigger emotion. He used the phrase throughout his tenure, for everything from his overhaul of the company’s Hollywood business to its development of a virtual reality headset.

Hirai became CEO at the end of a fiscal year with 437.1 billion yen ($4 billion) in losses, as Sony struggled against rivals such as Samsung Electronics Co. and Apple Inc. The television business epitomized the trouble: Once an industry leader with its Trinitron technology, Sony had lost 714 billion yen on TVs in the previous eight years.

The next year, activist investor Daniel Loeb pressed Hirai to step up the pace of change. Loeb’s Third Point hedge fund proposed Sony sell part of its entertainment business in an initial public offering to impose more discipline. Hirai resisted.

Then in 2014, hackers broke into the computer systems of Sony’s entertainment division, revealing embarrassing internal correspondence and health details of employees and their children. The U.S. authorities ultimately said North Korea was responsible for the attack, perhaps in retaliation for the Seth Rogen comedy “The Interview.”

Still, Hirai fought through the troubles. He elevated Yoshida to chief financial officer in 2014 and together they methodically worked through Sony’s many troubles. By cutting back in smartphones and TVs and steadily investing in promising new ventures, the company’s finances began to improve. Sony made a small profit in the 2014 fiscal year and has boosted net income steadily since.

One important wager Hirai made was heavy investment in image sensors, critical components for the cameras used in increasing numbers in smartphones. His bet on the PlayStation business paid off. He also tried to rekindle Sony’s entrepreneurial strength, introducing an internal accelerator program in 2014 that let employees pitch new ideas. Results on that front have been mixed. Still, when Hirai handed over the CEO post in April of last year, Sony posted a fiscal year operating profit of 734.9 billion yen.

“Hirai established a good foundation for the business,” said Yoshiharu Izumi, an analyst with SBI Securities Co Ltd. “He should be appreciated.”

Nevertheless, Hirai leaves as Sony is in need of another revival. With fewer games in store for the aging PlayStation 4 and Sony’s own Xperia phone business bleeding money, CEO Yoshida will have to prove that the turnaround can continue. The mobile division had an operating loss of 15.5 billion yen during the December quarter, the fourth straight unprofitable period. Yoshida has so far rebuffed pressure to sell off the unit.

The PS4, headed for its sixth year, is one of the best-selling consoles in history. But this year’s software lineup is smaller than the record-setting 2018, mostly focused on a pair of zombie titles. Even the camera chips business is seeing an impact from slowing global demand for smartphones. Operating profit in chips fell 23 percent to 46.5 billion yen in the most recent quarter.

“He stepped off at the very best time,” said author Tateishi. “If you ask if what he left is sustainable, that’s questionable.”

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, Robert Fenner

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