Analysis: Is Sony buying time - or problems?

Wed Oct 3, 2012 5:12pm EDT
 
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By Tim Kelly

SINGAPORE (Reuters) - Sony Corp (6758.T: Quote) CEO Kazuo Hirai has spent $1.8 billion in the past three months snapping up an assortment of businesses such as medical equipment and cloud gaming, leaving investors to worry he is blowing his firm's waning finances on a muddled plan to revive the fading giant.

Hirai, a Sony veteran of nearly three decades, took over the top spot in April pledging to reshape the once-stellar brand around the pillars of gaming, digital imaging and mobile devices. Since his promotion, the company's stock market value has fallen by around $8 billion.

After a decade of losing money on TVs, and four consecutive net loss-making years squeezed in the competitive vice of Apple Inc (AAPL.O: Quote) and South Korea's Samsung Electronics (005930.KS: Quote), Sony is running out of time and money.

"There are signs of change, but it's only a start," said Tetsuro Ii, CEO of Commons Asset Management.

"From what we have seen so far his strategy appears fractured and the investments aren't going to be profit drivers. He should probably give a clearer explanation of his new Sony. The only way Sony is going to improve its finances is to earn."

Anguish over the demise of Japan's electronics giants has for the past two months focused on TV pioneer Sharp Corp (6753.T: Quote). That eased on Friday when banks agreed a $4.6 billion bailout, averting the immediate danger of a liquidity crunch.

While still a long way from being the next Sharp, Sony has seen its five-year credit default swaps - the cost of insuring its debt - double to more than 400 basis points since Hirai took charge.

Analysts, meanwhile, view its profit outlook as overly optimistic and its finances are eroding as its credit rating edges closer to junk amid the splurge of acquisitions.   Continued...

 
President and CEO of Sony Corporation Kazuo Hirai addresses a news conference before the start of the IFA consumer electronics fair in Berlin, in this August 29, 2012 file photo. Sony Corp CEO Hirai has spent $1.8 billion in the past three months snapping up an assortment of businesses such as medical equipment and cloud gaming, leaving investors to worry he is blowing his firm's waning finances on a muddled plan to revive the fading giant. Hirai, a Sony veteran of nearly three decades, took over the top spot in April 2012 pledging to reshape the once-stellar brand around the pillars of gaming, digital imaging and mobile devices. Since his promotion, the company's stock market value has fallen by around $8 billion. REUTERS/Tobias Schwarz/Files