Is Sony out of the woods? Hardly. Will splitting Sony into two restore the future of Sony? I am not so sure.
MADISON, Wis. — Sony posted net income of 3.5 billion yen (US$35 million) in the quarter that ended June 30, after a loss of 24.6 billion yen in the quarter a year earlier. Sony also reported an operating profit of 36.7 billion yen ($369.68 million), beating the 25.3 billion yen profit expected by financial analysts.
Let's not sugarcoat this. The company's results were boosted mostly by a weaker yen.
The increased sales of Sony's Xperia smartphones and image sensors, however, also contributed to the results. Sony's revenue increased 13 percent, to $17.3 billion.
So, is Sony out of the woods? Hardly.
Will splitting Sony into two restore the future of Sony? I am not sure.
During the company's press conference, Sony's chief financial officer, Masaru Kato, reportedly said: "We were able to achieve adequate (first-quarter) results but I'm not necessarily optimistic about the future."
That uncertainty is keeping Sony vulnerable, giving an opening for activist shareholder Daniel Loeb to press his proposal to split Sony in two.
Loeb's Third Point hedge fund wants Sony to spin off as much as a fifth of its money-making entertainment business operation -- movies, TV, and music -- in order to make it more transparent and accountable.
Sony's board has been entertaining Loeb's proposal for over a month now. Sony CEO Kazuo Hirai told shareholders last month the company's board would carefully consider Third Point's suggestions. CFO Kato on Thursday, August 1, said the board was continuing to discuss the fund's suggestions, including input from outside financial advisers.
With all that politeness aside, here's the thing: Is this a proposal Sony really needs to entertain for so long?
I may be missing something here, but help me understand why splitting Sony in two is a good idea. I don't understand how this would ever help restore Sony's electronics business.
When I asked the why-split-Sony question, Richard Doherty, director of technology consulting firm Envisioneering Group, made it very clear: "Mr. Loeb's ambition and his stated goal are two different things." He speculated that the activist may be "using the [weakness of the] CE business" to find gains for his hedge fund.
"Talk to any entertainment industry analysts. I don't think anyone can find logic in this," said Doherty.