Sony (NYSE:SNE) is seeking advice from a third party about Dan Loeb’s suggestion that the company give an initial public offering of its entertainment division in order to return focus to its lagging electronics arm.
Sony is working with Morgan Stanley (NYSE:MS) and Citigroup Inc. (NYSE:C) in considering Loeb’s proposal. The billionaire investor has acquired more than 6 percent of Sony, a stake worth $1.1 billion, and is pushing the company to sell 20 percent of its entertainment division in an IPO. Loeb’s Third Point LLC would be willing to buy $2 billion of the offering if there isn’t demand elsewhere.
Sony Chief Executive Officer Kazuo Hirai has said that Sony will closely consider the option, but also added that it’s too early to speculate on what the final decision will be. Though Sony initially found its biggest success with its electronics, the division hasn’t been profitable recently. Loeb would like to change that by using money from an IPO to ramp up Sony’s electronics division.
While Sony has suffered 9 straight annual losses on making TVs, it has made up for the losses in electronics with its successful financial services and film earnings. Sony’s movie studio topped U.S. box offices last year with blockbusters like the latest James Bond installment “Skyfall” and the newest “Spiderman” film. The Tokyo-based company is Japan’s largest television-maker, but it hasn’t been able to keep up with competition from Samsung’s (SSNLF) TVs or Apple’s (NASDAQ:AAPL) smartphones and tablets.
Hirai believes the electronics division is improving, citing recent success with the Xperia Z smartphone and plans for the upcoming PlayStation 4. He also expressed some trepidation about Loeb’s suggestion, saying, “If you look at the value of the entertainment properties for Sony, it’s been a great contributor to the bottom line. We definitely want to make sure we can continue a successful business in the entertainment space. That is for me, first and foremost, the top priority.”