Sony Corporation (NYSE:SNE) (TYO:6758) will hold its AGM on 20 June. Last year’s event was attended by close to 10,000 shareholders. Sony will likely highlight accomplishments to-date including an increasingly clear turnaround in electronics. Expect the Board to be elected as proposed.  Also expect management to be questioned on Third Point’s proposal; the likely (and proper) response would be to maintain that it is a subject for Board deliberation.


Sony Corporation (NYSE:SNE) (TYO:6758) BOD

The main item on the agenda is the election of the Board, including three new candidates – Joichi Ito (Director of the MIT Media Lab and an interesting choice), Eikoh Harada (Chairman, McDonald’s Japan) and Tim Schaaff (former head of Sony Network Entertainment, who had responsibilities now taken on by SCE President Andrew House). One of the first tasks of the incoming Board will be to consider Third Point’s proposal.

Damian Thong, CFA an analyst at Macquarie says in a new note that they do not think Sony will proceed with the entertainment business carve-out as proposed by Third Point pointing to management comments suggest that they are comfortable with the status quo. They believe there is a 1-in-5 in terms of imminent action (i.e. in one year), though the possibility in the longer term increases, with the Sony Financial Holdings IPO in 2007 as a precedent.

Damian Thong agrees with Third Point that the entertainment businesses seem to be delivering sub-par profitability and are undervalued. As a sop, Sony may offer investors greater disclosure on the profitable entertainment businesses, which many would consider this positive. On the other hand it is not clear how they can openly address Third Point’s claim that the management of the entertainment businesses are under-performing.

Third Point is upping the volume by announcing in a second letter that it had raised its economic interest in Sony to the equivalent of 70m shares (~7% exposure; 46m shares plus 24m shares via cash-settled swaps). Third Point has proposed, as part of the carve-out, that the entertainment business has a separate Board chaired by Mr Hirai to improve “discipline and accountability”.

The electronics turnaround appears to be turning around. Many have highlighted: (1) Sony Corporation (NYSE:SNE) (TYO:6758)’s remarkable consistency in execution with its new CE products, underscored by smartphone share gains in Japan, potential launch of the Xperia Z on T-Mobile’s US LTE network and the likely unveiling of the Xperia Z Ultra “phablet” on 4 July; (2) Sony Corporation (NYSE:SNE) (TYO:6758)’s solid PS4 strategy, and many take view that the PS4 will dominate in the upcoming generation with a strikingly low price of US$399.