Sony’s turnaround over the past decade was built on hard-nosed accountability and the willingness to close troubled businesses. Indeed, Kenichiro Yoshida was elevated to CEO because he acted as the company enforcer when he was finance chief.
But Sony’s latest move has some investors wondering what happened to the old Yoshida. The Tokyo-based company said on Tuesday it will combine the struggling Xperia mobile business with its television, audio and camera operations into a single division. That will make it harder for investors to see losses in the smartphone unit, which has long struggled against Apple and Samsung Electronics.
The move comes after investors have complained for months that Yoshida should get rid of the Xperia business. Shares plunged to a 17-month low last week after Jefferies’ Atul Goyal became the latest analyst to downgrade the company, citing worries over mobile losses. The latest move will buy Yoshida more time, but analysts say it won’t resolve the underlying problems.
“By hiding the mobile-related losses, they would take the pressure off from shareholders to shut the division down,” Amir Anvarzadeh, a market strategist at Asymmetric Advisors, said in a note to clients. “Nevertheless, the losses are bound to rise further.”
Sony representatives didn’t respond to calls requesting comment.
The Xperia business has lost ¥101-billion (US$913-million) over the past four quarters, compared to operating profits of ¥82-billion at its TV and audio division over the same period, and ¥89-billion at its camera unit. Yoshida has rebuffed pressure to get rid of the unit, saying it’s vital for pushing innovation including 5G-related research.
The restructuring will create a new division called Electronics Products and Solutions and is scheduled to go into effect from 1 April. That would mark the first major reporting overhaul since 2012, when previous head Kazuo Hirai split the consumer electronics unit into individual parts in a bid to boost transparency.
Sony shares were little changed after the announcement. The stock had dropped 10% this year through to Tuesday’s close, compared to an 8.3% gain for the broader Topix index.
“Sony’s unwillingness to exit smartphones is a disappointment and a strategic mistake, in our view,” Goyal wrote in his report last week. The analyst cut his buy rating for the first time in five years and slashed his price target to ¥5 500 from ¥8 500. — Reported by Yuji Nakamura, (c) 2019 Bloomberg LP