Sources indicate that Sony Corporation is currently considering a proposal from one of its top shareholders, Third Point LLC, to spin off its movie and music businesses. Reuters reports that hedge fund manager Daniel Loeb’s hedge fund, which owns 6% of Sony’s stock worth roughly $1.1 billion, called on Sony to spinoff its profitable entertainment arm amid a decline in some other segments.
News of the potential spinoff sent shares of the company up 9% with shares trading at $22.87 yesterday afternoon.
The Wall Street Journal reports that Sony has announced that it plans to discuss the proposal with its board.
"The proposal from Third Point, Dan Loeb is something that we should discuss thoroughly at a board meeting and then we'll decide Sony's stance," Chief Executive Kazuo Hirai said in a briefing Wednesday to lay out his strategic vision for the company. "Therefore, we are now going to start the discussion and we are still at the starting stage."
Hirai didn't offer any timeframe for the discussions.
Loeb believes that taking up to 20% of Sony's Entertainment Division public would help generate capital needed to overhaul Sony's ailing electronics business. Sony performed something very similar in 2007 when its banking and insurance unit made an IPO.
Kazuo "Kaz" Hirai, President and CEO of Sony Corporation
Sony is mostly known as an electronics company, but electronics are not the segment that generates most of the company's revenue. Sony's entertainment and insurance units generate the vast majority of company profits.
Sluggish sales in the electronics market (TVs, digital cameras, computers, etc.) are having an impact on Sony's bottom line. Sony has also found it increasingly difficult to compete in the smartphone market, but the company is beginning to shift more of its focus there because of significant growth potential.