Many eyes are on Sony and its newly appointed CEO, Kazuo Hirai, or simply known as “Kaz” in the gaming circles as he continues to follow through on his initiative laid out a year ago. Hirai initiated a plan to make Sony leaner and more agile by getting out of profit losing businesses and to focus on its core divisions such as LCD/OLED imaging, the PlayStation brand and mobile.
Getting Out of Non-core Businesses
Just last year Hirai made sweeping changes which at first raised some eyebrows but ultimately ended up reducing the red in the financial quarters and increasing share value. Just recently Sony sold one of its New York buildings for $1.1 billion, which initially garnered some criticism. The gut reaction was that Sony is in trouble and is desperately selling off its property.
However, this was a calculated move on Sony’s part and involved careful negotiations for some time to squeeze every penny out of the “non-core” asset. Doug Harmon, senior managing director at Eastdil Secured LLC, who represented Sony in the negotiations stated:
The fact that we had, at the end of our process, four diverse groups poised to pay $1.1 billion, some with leases and contracts already negotiated, is a true testament to the hunger for prized properties.
Sony initially paid $236 million for the 32 story building back in 2002 from AT&T and was able to sell it for more than four times that cost. Many analysts believe this was the smart move on Sony’s part as it housed business units from its non-core divisions such as Sony Music Entertainment. Investors apparently also felt this was a smart move as the company’s shares increased by 12 percent on the heel of the news. As part of the deal, Sony will continue to occupy the building for the next three years until it finds a new headquarter.
Sony recently revealed that it was also looking to sell its battery division with factories in China and Singapore valued close to $600 million. The Japanese government is offering to provide state-backed funding to firms who will invest with Nissan-NEC venture to purchase Sony’s battery division. This is all in efforts to prevent China from acquiring this business unit.
Clearly we are seeing a pattern here with Hirai as he is making good on his promise to literally get out of the business sectors that are unprofitable. Its obvious that when you spread yourself out too thin, sectors that you are not strong in will become a burden on the company.
If you are no where near the top of the competition technologically or from a business standpoint in markets such as batteries, camera lens, chips and chemical manufacturing sectors it just doesn’t make sense to continue to carry the overhead as it will only drag the company down.