Ben-DutkaThis could be big.
After billionaire hedge fund investor Daniel S. Loeb proposed that Sony split the company apart , it seems the electronics giant is moving forward with that suggestion.
According to a new Bloomberg report , Sony has tapped financial firms Morgan Stanley and Citigroup to help with the split that would result in Sony's entertainment business obtaining its own IPO. Loeb believes this move will let the "hidden gem" that is Sony's entertainment division shine. Sony CEO Kaz Hirai has said they were considering the plan, although "it's only a start." Guess we'll have to see if Loeb and the other stockholders make more money…
It's "premature to speculate on the board's decision" at this point but we know the subject has been seriously discussed.
I'm not a financial analyst so I'm curious as to what the advantage is in this. Anybody?
I also would like to know.
Some things to ponder:
1.- SCE would have it´s own budget, shares, profits, losses, etc. But this doesn´t mean the high rollers of Sony can´t play with both budgets, profits, etc. For example if SCE has some giant profits, it may pass some to another division (doing some accounting and legal tricks). I don´t know if this is illegal, but a LOT of companies do it, world wide. The best examples would be that giant companies have little "toys" companies to play with, or better said, loose money. This way, if they don´t get any profits with this "toy" company, they don´t spend in taxes, or even get compensation for making some accounting movements.
2.-It may help focus the whole division, and once and for all, round it up. Maybe one account for every SCE product??
3.-One of the most important things, if it gets great profits, SCE as one, should get more investors, or in other words: more funding, fusions/buying with other companies, fresh ideas, etc. And as contrary, right now it may be loosing funding/opportunities due to attachment with the whole SONY brand.
4.-Related with #3, it´s independance. As said before, more independace = more profits to spend in self (but also more losses in such case). It could also mean that now they have their own decisions and risks to analyze when they arrive. These decisions and risk taken/not taken need to be explained to shareholders who are focused in SCE. And before, needed to be explained to the whole SONY shareholders, which may or may not affect future decisions, investments, profits, products, etc. In other words, a failure with a product that had nothing to do with entertainment could´ve been the reason why certain entertainment product didn´t saw the public, you get the point.
5.-Just a simple bucket of pure oxygen to the brand. Some times the simplest things are amazing, speaking in corporate world.
6.-It may be the statement by the highest ranked SONY guys that the future of SONY is based by this move, if not, bad things could happen. They could be feeling a little nervous or unsettled and are just preparing for more difficult times, financially speaking.
7.- If the move completes, SCE may take another philosophy, and if it delivers more money, SONY brand as a whole could adopt that philosophy. This means this is a risk move also, because that philosophy could deliver also less money.
8.-Obviously there are tons of things we don´t know for sure. But tendencies shows that the world of entertainment it´s getting lots of money and attention each year, so this is self explained if you read my previous points.
Last edited by godsdream on 5/31/2013 1:22:36 PM
Interesting, good post by the way. ^_^
Biggest advantage to Mr. Loeb would be a buyout of his shares from SONY so they could do the split or a 2/3 way stock split where Mr. Loeb would get 2/3 shares for every 1 share of stock he owns, one stock for each publicly trade division of SONY.
As for the advantage to SONY…. that is less visible. Since SONY electronics have been poor sellers for everything but it's gaming systems for the last 7 or 8 years.
Last edited by wackazoa on 5/31/2013 1:40:50 PM
I just hope my job is safe…
🙁
I suppose you work for SCE?? Cool.
Don´t worry Mcgee, must of the times the big fish realize the biggest treasure of the company who "took the risk" are their people. If someone makes a movement this big, I´m certain must of workers would keep their jobs. But to make sure, keep working hard!!
They are two completely different divisions.
You have the electronics side, producing TV's bla bla bla. and then the gaming side.
If one of them is making money, but the other one isn't, then both of them lose out because they are both responsible for each others portfolio's in a way. If you split the divisions completely, then they are entirely responsible for their own portfolio's.
Money.
I work IT around financial firms and the simplest scenario is this: You spin off a new IPO that a firm (in this case likely) is connected to Mr. Loeb. Mr. Loeb and partners because they are on the inside are offered a chance to "buy in" the moment the stock is issued at a lower price. If all goes to plans then the stock doubles or more by the end of a day or three. You then cash out quietly while big institution investors (city & state government pensions for instance) and little investors who jumped in after the stock takes off are now the primary investors. The stock generally plunges because it is over valued but the guys buying in know that and they are getting out before the hype balloon bursts. Sometimes this doesn't work (Facebook bombed since enough techs made it known even to the general public that mobile phones don't display adds thus sapping FB of it's projected revenue streams.) but by and large it does.
Now as to why one would want to split a mega company like Sony? The answer would be that Sony is too diverse and that by reducing itself to say an entertainment company on one side and an electronics maker on the other then the two businesses can focus solely upon what they do correctly. Of course no one says we should split say GE. Why? I guess no one is ready to fight them and to try and milk a IPO out of the deal.
Thanks for the info. It sounds a little questionable-legal but questionable.
@Kryten
It's called insider trading, and while it is technically illegal, (Martha Stewart went to jail for it) it does happen since there are gray lines everywhere that define the legality of it.
As far as GE goes, nobody wants it split because it once was split. GE bought all the smaller companies at low stock prices and built itself into the conglomerate that it is. Plus GE stock pay dividens and you usually dont mess with those stocks since they sort of pay you to own their stock.
Sorry Wackazoa but AT&T back in the day paid dividends (AT&T, GE, Phillip Morris, Kodak, Coke-A-Cola were often called the "Widows & Orphens Stocks" because of their dividends and assumption that those companies would be around forever.) and the government still split it up. In that case it was seen as a monopoly. Sony and GE may be leaders in various divisions of their business but not to the same effect as AT&T was. Name me one area where Sony is like 90% of a business. Or GE. Neither one comes close to being a monopoly like AT&T was back in the day.
Well I had mistakenly thought you were wondering why no stock holder had raised the idea of splitting GE. The American Telephone Company or Ma Bell as it was known was split up by the U.S. Government. Totally different circumstances between the possible split of SONY by stock holder request, and the split of Ma Bell by the U.S. Justice department.
I apologize for the confusion.
So I guess my onle concern would be, the profit. I mean we all know consoles typically are sold at a loss for awhile. We all know Sony didn't start making profitsearly on this generation. So if they split whos supporting the losses?
Doesn't sound like a good decision to me.
This is why in my previous comment I wrote what I wrote. It could be a great move but it´s very risky at the same time. In fact, so risky, that the PS3 was sold at the beginning loosing money with each sale. If I remember correctly, the console initial costs of fabrication was like 700ish so SCE division was loosing money with each console sold to public. Imagine selling a product that cost you more to produce… This fact was (?) absorbed by SONY brand, and not only by SCE, of course until Sony started to loosing the gap until it really made a profit per console sold.
Because it is a to side sharped blade, I still don´t know if it would be a good move or not.
I firmly believe that if SCE gets it´s independance, they mus focus in games and entertainment solely, and not keeping their minds in just making money. I´m almost sure that that would be the philosophy that saves the brand.
if they split up though, doesent that mean one of the biggest advantages $ony has always had, will be gone?
there one of the only companies out there who have so many hands in so many pies, so there able to share experiences between the different divisions.
think of their new 4K TVs, since they also own a movie studio they can remaster their movies in 4K to help their TV department push more TVs.
if they split the company up doesent that mean those advantages would disappear?
This could be true, or not. For example, if a TV supports 4k, it´s obviously not cheap. If the PS4 supports (which I think it would) 4k, it will be less cheap also. So everything counts. Yep, it´s a very hard move to choose, indeed.
It´s a matter of the glass with which you see things, sort of speak…
I´ll enjoy this story as it progresses. Hope they make the right choice for the PS brand tho.