Sony CEO Kaz Hirai began his tenure as CEO of Sony (TYO:6758) promising that he would strengthen the brand as a unified “One Sony”. However the last year has shown that his plans are anything but.
Last year Sony announced that it was spinning off its Vaio brand, smartphone brand as well as its television business into wholly owned subsidiaries, and now Hirai has announced that Sony’s audio and video brands are set to undergo the same treatment.
It should be noted that spinning off a business is different from selling it outright. A spun-off business operates at arms length from the original company, but is still wholly owned. In contrast, the other option is to sell the division to another party — usually a competitor or another company looking to broaden its portfolio of products.
After these spinoffs, Sony is left with three core businesses: movies, Playstation (gaming), and selling imaging sensors to the likes of Apple (NASDAQ: APPL) for smartphones. All three of these businesses have their respective challenges: Sony Pictures was the victim of a large-scale sophisticated hack last fall; the Playstation 4 has healthy sales but likely a shorter lifespan than its predecessor; Apple might pull the plug on its smartphone deal.
Sony shedding its less-profitable businesses should put it on track to profitability targets its CEO laid out. Hirai says he can bring the company back to profitability by 2018 in a big way — he’s promised $4 billion. The question is can a lighter Sony do it? Without a diverse line of businesses, if one falters there won’t be much else to protect the company from further losses.