Dan Loeb Pressures Sony For A Break-Up

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The activist investor, Dan Loeb wants Sony Corporation (TYO:6758) (NYSE:SNE) to part ways with its entertainment division. It is noteworthy that the entertainment segment of  Sony Corporation (TYO:6758) (NYSE:SNE) incorporates one of the biggest film studios in Hollywood and is also a dominating music label globally with movies like Sky fall and pop stars Taylor Swift. At the SALT Conference in Las Vegas, Dan Loeb mentioned that he found Japan an attractive place to invest.

What Dan Loeb Feels

But Loeb thinks that there is more to be done in the company and the good way to start it will be a spinoff of Sony Entertainment. The entertainment division is the 40 percent contributor in the company’s value but Loeb thinks that the company should be more disciplined to expand its profit margin. According to Mr. Loeb, the spin off can fuel the Sony’s stock price to surge as much as 60 percent.

What Sony said?

A spokesman for Sony, Shiro Kambe, said in a statement that the company welcomes investments. “We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the stable business foundations of the entertainment and financial services businesses,” he said.

Kambe stressed upon the fact that chief executive of Sony Corporation (TYO:6758) (NYSE:SNE) Kazuo Hirai believes that Sony entertainment is one of the most important contributors in the revenue of Sony and is not meant for sale.

Mr. Hirai, the chief executive of Sony will hold a presentation on the company’s turnaround strategy next week. Hirai said that though the company has been laggard in switching to the digital era, but the history of innovations like Walkman, the Trinitron television and the Playstation reflect that the company has the capability to rebound.

Letter By Dan Loeb

Dan Loeb held a meeting with the government officials, regulators and Senior Sony executives. He wrote a letter in which he encouraged the turnaround efforts of the company but also expected to see more.

He mentioned in the letter that Third Point is helping the company, but Sony needs to focus more in order to succeed. The letter was reviewed by The New York Times. Loeb said that the company will be able to tap more of its efficiency in core electronics business, which can earn more profit for the company after spinning off the entertainment business.

The activist investor was the man behind bringing Marissa Mayer from Google (NASDAQ:GOOG) and replacing the former chief executive at Yahoo! Inc. (NASDAQ:YHOO). He also indicated that he wishes to be on the board of Sony.

Hedge fund of Dan Loeb is one of the biggest stakeholders in Sony holding around 6.5 percent in the PS maker. The value of the stake is $1.1 billion.

Full letter from Dan Loeb below:

Further Reading Loeb’s Third Point Opening A Greek Focused Hedge Fund

Dan Loeb letter to Sony by ValueWalk.com

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