Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) hired Bain & Co., a firm with expertise in restructuring, to help the management of the Japanese company determine as much as $100 million in spending cuts in its entertainment business, according to a report from Bloomberg based on information obtained from a source knowledgeable about the situation.
Sony expected to discuss its strategy
According to the source, who requested anonymity because the plan is still private, the proposed $100 million spending cuts will include job cuts. Kazuo Hirai, chief executive officer of Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) is expected to discuss the strategy of the company for its entertainment business during a conference scheduled in November 21 at its studios in Culver City, California.
Activist investor Dan Loeb of Third Point Reinsurance Ltd (NYSE:TPRE) had been pushing the management of Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) to implement changes particularly to spin off its entertainment business. Third Point owns a 6.5% stake in the Japanese company.
Dan Loeb and Sony
The Japanese company rejected Loeb’s proposal, but promised to continue to evaluate his proposal last August. Hirai explained that the entertainment business is very valuable and critical for the growth of the company in the future. “This proposal strikes at the heart of what kind of company Sony ultimately will become in the future. We intend to take our time in discussing it,” stated Hirai previously.
Commenting on the latest decision of Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) regarding its planned cost cutting, Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management in Tokyo said, “The effect of Daniel Loeb is generating results. However, entertainment is a growing area for Sony, and improving the business cannot be all about just cutting costs. Sony should do both cost-cutting and pursue growth measures.”
According to Charles Sipkins, spokesperson for Sony Pictures, the spending cuts are part of the increasing fiscal discipline process the company has been engaged in for almost four years. He added that the company is currently reviewing the businesses of its entertainment unit to identify further efficiencies.
Hirai to convince investors of Sony’s competitive advantage
During the upcoming conference, Hirai is expected to convince investors of the company that Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) has a competitive advantage by owning content. The company owns film studios including Columbia Pictures and Screen Gems, and regularly competes with Warner Bros as the biggest movie distributor. Sony Pictures Television own 65 TV channels worldwide, and it is the producer of the popular shows Breaking Bad and Masters of Sex
During the investor conference sponsored by The New York Times last week, the company’s film studio is evaluating the implementation of changes in the process of selecting movies after the box-office flops of After Earth and White House Down.
In terms of box office sales this year, Sony Corporation (ADR) (NYSE:SNE) (TYO:6758) ranked fourth with $1.13 billion revenue, according to film industry researcher Box Office Mojo.