Activist Investor Dan Loeb Makes Appearance on Sony Earnings Call

6:49 AM PST 08/01/2013 by Georg Szalai , Gavin J. Blair
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Daniel Loeb

UPDATED: The head of hedge fund Third Point, who has been pushing for an IPO of the conglomerate's entertainment business, highlights that the film unit would not have been profitable in the latest quarter without an asset sale.

Activist investor Daniel Loeb made an appearance Thursday on Sony Corp.'s earnings conference call for overseas investors, asking about the underlying profitability of the conglomerate's film unit.

The company had reported a $38 million operating profit for the film unit, citing the sale of a music publishing catalog as providing a key $106 million one-time benefit that offset lower theatrical revenue. Loeb, who has been pushing for an IPO of the Sony entertainment business via his hedge fund Third Point, asked again during the call how much the sale brought in. Sony's CFO Masaru Kato responded that it yielded roughly $106 million without highlighting that it was disclosed in the earnings report.

RELATED: Dan Loeb Blasts Sony's Summer Flops: Latter-Day 'Ishtar,' 'Waterworld'

The sale, to Canadian company Ole Publishing, was part of "monetizing the value of what we have created," he explained.

Loeb in response highlighted that the film unit would not have been profitable in the latest quarter without the music deal.

The investor also asked a question about the PlayStation 4 and its likely profitability.

The Sony executive explained some of the cost benefits of the PS4 development process and said the company would later announce how many units it plans to ship. "We are very much encouraged by the response we have seen" at the E3 video game conference, he said.

Earlier in the day, Sony executives declined to answer questions during the company's earnings conference in Tokyo about its response to Loeb's proposal to sell off part of the entertainment division, but they repeatedly emphasized its importance to the company.  

Loeb has been ramping up his rhetoric against Sony Pictures Entertainment this week, lambasting its senior executives over box-office flops After Earth and White House Down in a change of tone from his earlier approaches to Sony.

However, business daily Nikkei, a widely trusted source and recipient of the lion's share of leaked corporate information in Japan, reported late Wednesday that Sony was set to reject Loeb's proposal.

Sony executives during its earnings announcement in Tokyo appeared to be going out of their way to reiterate that entertainment was crucial to the conglomerate's long-term business plans.

"Synergy between hardware and software, such as creating content for hardware, such as 4K movies and programs for 4K television sets, remains central to Sony's strategy," said Kato in that session.

Sony Pictures is also targeting emerging markets, such as India, where it broadcasts the Indian Premier League cricket competition, for growth in its television network business, according to Shiro Kambe, a senior corporate spokesperson.

In response to questions about Loeb's claim that Sony Pictures is less profitable than its industry peers, Kato reported that the company was currently examining data related to the matter to confirm whether or not that was the case. 

E-Mail: Georg.Szalai@THR.com
Twitter: @georgszalai

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