Dan Loeb says that Sony Corporation (NYSE:SNE) (TYO:6758) reminds him of Yahoo! Inc. (NASDAQ:YHOO) before he waged a proxy battle at the web giant. The hedge fund manager made the comments while speaking to Reuters today. Right now, Dan Loeb is in the opening phase of a battle that he hopes will see the Japanese diversified giant sell off a large portion of its Entertainment arm.
Third Point Stakes In Sony Corporation (SNE)
Dan Loeb’s hedge fund, Third Point LLC has built up a $1.1 billion stake in Sony Corporation (NYSE:SNE) (TYO:6758). Back in 2011, Loeb built up a large stake in Yahoo! Inc. (NASDAQ:YHOO) and began a long and arduous battle that eventually saw the board of the company shaken up and the firm’s upper management changed.
Loeb says that Sony Corporation (NYSE:SNE) (TYO:6758) is similar to Yahoo! Inc. (NYSE:YHOO) in that it has been overtaken in its business in recent years by more flexible and innovative competitors. In the case of Yahoo! it was Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB), as well as a host of smaller companies. When it comes to Sony Corporation, it’s Apple Inc. (NASDAQ:AAPL), and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930).
Sony Entertainment, which is the arm of Sony that houses its music and movie offerings, brought in 37 percent of the company’s operating profit last year, but according to Loeb, the company is under performing. “Their margins are the lowest in the industry,” said Loeb to Reuters in Tokyo, “We think it could be a lot more disciplined.”
Dan Loeb is going as far as to criticize the entire philosophy of Sony Corporation (NYSE:SNE) (TYO:6758), in which the company tries to offer both the hardware and content for customers, with hardware like smartphones, BluRay players, and Playstations and all the content to fill them. “It’s all been theoretical,” according to the hedge fund maven. “There has been no monetization of that relationship.”
As with any controversial move in the hedge fund world, particularly in activist campaigns, analysts and other hedge fund managers have been lining up on both sides of the proxy battle. Loeb said that he’d be happy to take a role on the board at Sony Corporation. Loeb wants to return the company to its core business, but Sony is so diversified at this stage it’s difficult to tell what that is.
Dan Loeb is going to be cautious in the opening phase of his campaign, hoping that the board will act on its own. If it doesn’t he may become more aggressive, as he did at Yahoo! Inc. (NASDAQ:YHOO).