Kazuo Hirai, Chief Executive of Sony Corporation (NYSE:SNE) (TYO:6758) has restated that the music and movie arm of the company will not be sold reacting to the further pressure from American activist investor Daniel S. Loeb who is insisting on parting the businesses. Though the company’s board would continue to study the matter.

Dan Loeb

In the annual general meeting of the company in Tokyo, Hirai said that the music and movie business of the company is an integral part of the growth strategy of the company. Mr. Loeb has proposed detaching the entertainment business partially and put the realized funds in the electronic business, which is deep in losses.

Mr. Hirai said that the entertainment business is vital for the growth of Sony in the future and it is of much value to the company. He said that, “This proposal strikes at the heart of what kind of company Sony ultimately will become in the future’’ he said. ‘‘We intend to take our time in discussing it.’’

Dan Loeb’s Second Letter

Third Point Company owned by Loeb is the biggest shareholder in Sony. Loeb’s suggestion came as a surprise earlier. Mr. Loeb mentioned in a letter to the Board of Sony that the prior stake of 6.5 percent in the company has now been escalated to 7 percent or around 70 million shares. He asked Hirai to give due consideration to his proposal.

In his letter, Loeb advised Hirai that he should take over as the chairman of both the Boards to bring synergies between Entertainment and Sony Corporation. The Board of the Entertainment wing should constitute of various individuals who have immense knowledge of media, entertainment and digital technology.

He said that till now there has not been any discussion over the proposal with the investment bankers or Board, but this would be the best opportunity for the Board to exhibit that they are dedicated to the declaration “Sony must change.”

Loeb’s reasoning

Loeb said that spinning of the entertainment arm of Sony will provide capital for the ailing electronic business. Additionally, with an independent board of its own the entertainment business of the company will be able to look into the matters of revival and spending plans in a better way. Apart from this Third Point has also demanded a place on the board of Sony.

Analyst differ

Analysts however, see no good in dividing the business of Sony as it will take away the profitable wing from the business and the company will not be able to access the cash profits, and will be left with the struggling electronic division. The major chunk of profit for Sony has come from content and insurance business and the electronic business has been in the red.