Dan Loeb Urges Sony to Separate Entertainment, Electronics Units

Kenichiro Yoshida - Getty - H 2019
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The activist investor's hedge fund, Third Point, penned an investors letter in which it argues the Japanese company, led by CEO Kenichiro Yoshida, should spin off its semiconductor business.

U.S. activist investor Dan Loeb's Third Point hedge fund has called on Japan's Sony Corp. to break up its electronics and entertainment units into separate businesses.

Six years after making a similar pitch, Third Point in a June 13 letter to investors said Sony remained undervalued because of "portfolio complexity," which could be solved by spinning off the semiconductors business into a separate, publicly traded company.

"Sony's gaming, music and pictures segments would become the core after the semiconductor spin," the letter states.

The entertainment-to-electronics group, led by CEO Kenichiro Yoshida, has seen its stock fall in 2019 on concerns about falling demand for the sensors it supplies to smartphones, falling sales of its PlayStation 4 console and concerns about a global economic slowdown.

In a separate 102-page presentation titled "A Stronger Sony," Third Point praises Sony's senior management for growing the company's earnings, while arguing the financial markets have not understood or rewarded that transformation.

"Despite its operational excellence, strong leadership, diversified portfolio of outstanding businesses and tremendous potential for further value creation, Sony is undervalued and underestimated by the market," Third Point stated.

During an investors presentation in Tokyo last month, Sony Corp.'s Yoshida and Sony Pictures Entertainment chairman and CEO Tony Vinciquerra touted Sony Pictures' upside in a rapidly shifting entertainment landscape amid industry consolidation and the rise of streaming services needing premium content.

"Following a spinoff of semiconductors, Sony will emerge as a focused entertainment company with leading global positions in gaming, music and film," the Third Point investors presentation argued.

Third Point also called on Sony to consider selling off stakes in Sony Financial Holdings, M3, Olympus and Spotify Technology.