Sony Corporation (TYO:6758) (NYSE:SNE) is evaluating all aspects of billionaire investor Daniel Loeb’s proposal of spinning of its entertainment business. Sony raised its full year revenue guidance on the weaker yen.
Loeb’s proposal under discussion
During the earnings press conference today, investors demanded further information about the entertainment units that make films, TV shows, to which chief financial officer Masaru Kato said that the company is being assisted by financial advisors, as well. However he did not say anything over when the decision will come.
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“It is an important proposal, and the board will make a decision after having a thorough discussion,” Kato said. “The discussions are only midway, and we cannot comment further.”
Loeb criticized Sony Corporation (TYO:6758) (NYSE:SNE) for giving high salaries to those senior executive who are underperforming. He went on to say that entertainment profit margin of Sony is much behind its competitors, and it needs better supervision, says a report from Bloomberg.
Posts profit, raised guidance
For the first quarter, net income came in at 3.48 billion yen as against loss of 24.6 billion yen in the corresponding quarter of the previous year.
Sony Corporation (TYO:6758) (NYSE:SNE) exports, which contribute around 70 percent of its revenue, are getting strength from Japanese monetary policy. For full fiscal, company raised its revenue guidance by 5.3 percent to 7.9 trillion yen after excluding expected shipments of TVs, digital cameras and personal computers through which it is trying to compete with Samsung Electronics.
According to Hideki yasuda, analyst at Ace institute in Tokyo, currency weakness is the main catalyst. He said that Sony has slashed its unit sales expectations for a lot of product segments. It should not be seen that the company is becoming fundamentally strong, but it is because the Yen is supporting the earnings.
Sony garnered smartphone market share of 3.8 percent for the first three months of 2013, a bit high from 3.6 percent in the previous year. TV segment reported operating profit of 5.2 billion yen. The company is all set to launch Play station 4 gaming console this year to monetize on games as users are shifting to mobile games.
Price competition won’t matter much for Sony
Analyst Kevin Chang of Citi Research said that Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has intensified price competition after it increased market spending due to sluggish Galaxy S4 sales. In this rising price competition, Sony will face a little harm, believes Chang, as pricing of its Xperia brand is not too loud. Additionally, the phone succeeded in establishing itself a different brand in terms of processor, memory and various other components.
Citi Research has set a price target for Sony Corporation (TYO:6758) (NYSE:SNE) at $26.46 and has noted potential risks like changes in flat panel TV prices, unstable forex trades, and rapid commoditization of products among other factors.