Wall Street Journal Says Japan's Electronics Industry to Extend

Foreign media published an analysis on Tuesday that hedge fund manager Daniel Loeb, a billionaire hedge funder, pressed Sony to dismantle its entertainment division. As the global technology industry has lost its leading position, the Japanese electronics industry has already suffered unprecedented losses.

With the rise of Samsung Electronics and Apple's dominance of the global consumer electronics industry, the Japanese electronics industry has been experiencing painful years. Today, the once powerful Japanese electronics maker is desperately hoping to get outside investor funding to deal with the pressure on companies to redeem corporate bonds that are about to expire. The bonds of Japanese electronics manufacturers have also been the most iconic products in the Japanese corporate bond market.

Japan’s electronics industry suffered a series of pains as the market adjusted and reformed the domestic economy by Shinzo Abe, the new prime minister. At present, all parties are generally optimistic about Abe’s reform plan. Abe Shinzo and Bank of Japan Governor Haruhiko Kuroda have introduced a very aggressive monetary policy aimed at reversing the long-term sluggishness of the Japanese economy. These measures are attributed to the weakening trend of the yen exchange rate, and promote the rising stock index of the Japanese stock market.

Third Point founder Loeb mentioned in a letter to Sony CEO Kazuo Hirai on Tuesday that "Sony is at the crossroads of compelling business opportunities and Japan's economic reforms. Let Sony's overall success be maximized. We believe that Sony must change the ownership structure of Sony Entertainment," Loeb urged Sony to issue 15% to 20% of entertainment shares to the public. Loeb believes that if Sony follows his advice, Sony's stock price is expected to rise by as much as 60%, because the value of the entertainment business has not been released. Sony entertainment business includes film and music assets.

In the past, Sony has refused to sell its entertainment assets because Sony firmly believes that content can promote the company’s electronic product sales. Over the past five years, Sony’s stock of ADRs listed on the US stock exchange market has fallen by more than 50%. Sony's American Depositary Receipts rose by 10% on Tuesday to close at $ 20.76, prompted by Loeb’s request for Sony to spin off the entertainment sector.

According to sources familiar with Sony's ideas, before discussing whether to spin off the entertainment sector, the Sony Board of Directors will first focus on whether it meets the company's long-term interests. The news also stated that there is more synergy between the entertainment sector and the electronics sector than in the financial and electronics sectors.

As a response to Loeb’s open letter, Sony reiterated its long-term position on the entertainment business, saying that the business “is an important contributor to Sony’s growth and will not be sold externally.” However, Sony also said in the statement that the company is While following the company's strategy, we continue to have a constructive dialogue with shareholders and maintain an open attitude.

According to sources familiar with Loeb, Loeb has already contacted Sony's representative and told Sony that his company does not take a confrontational approach as some media have hinted. Loeb told Sony that Third Point did not ask Sony to split, and stressed that many of his comments in the letter have been considered by Sony executives, or are in preparation. Loeb believes that Sony executives and board directors should hold more Sony stocks, thus combining their own interests with the interests of shareholders. He also believes that Sony's entertainment division should increase its profit margins. Only Loeb is not familiar with Sony, so in the letter did not mention what Sony needs to do.

Loeb's disappointment with Sony seems to be consistent with others, not that Sony is already ill. Market analysts who have included Sony in their research are usually analysts who study the electronics industry, not media or entertainment industry analysts.

As another example of the transformation of the Japanese electronics industry, after releasing a financial report with annual net loss of 545 billion yen (about 5.4 billion U.S. dollars), Sharp, which has been established for 100 years, said that the company plans to replace the president at the same time. With the chairman. Sharp said that the 58-year-old executive vice president Kozo Takahashi will take over the current president Takashi Okuda. During his time as president of Sharp, Mr. Okuda led the company’s efforts to acquire capital and provided an early warning of his own future. Ota Takashi will succeed the current chairman, Mikio Katayama, as Sharp's chairman without representation. Katayama was the former president of Sharp and was responsible for the company’s radical expansion into the LCD panel business, but ended up failing. The appointment will take effect after Sharp's annual shareholder meeting on June 25.

Sharp's new president, Takahashi Hiroshi, said at the press conference on Tuesday: “We need to say goodbye to Sharp, who has a good understanding of the past few years. We need to be prepared to make changes to the company, not just basic principles.”

Sharp and Sony's recent problems are just the epitome of Japan's electronics manufacturing industry. In order to protect the company's leading position in the CRT TV industry, Sony has delayed the transition to flat-panel TVs and has handed over its leading edge to Samsung Electronics. It is precisely because of this that Sony's TV business has suffered consecutive losses in the past nine years. From beginning to end, Sony has made progress on its own invented new products, such as e-book readers and LCD TVs, which have caused competitors' products to become popular.

At the same time, Sharp invested billions of dollars in the construction of a first-class LCD panel manufacturing plant in Japan. However, due to the financial crisis and the sharp appreciation of the yen exchange rate, and the market's declining demand for flat-panel TVs, Sharp's losses began to expand. In the end, Sharp was forced to sell half the stake in the factory to Hon Hai Precision in Taiwan.

Japanese electronics manufacturers also failed to take advantage of their early advantages in mobile technology. Although Sony is trying to break the dual monopoly of Samsung Electronics and Apple on smart phones, most Japanese companies have missed the boom in the smart phone market and must now bear their own weight.

Digital cameras are one of the few industries where Japanese electronics manufacturers still dominate, but sales of digital cameras, especially card machines, are experiencing a sharp decline. According to the Camera & Imaging Products Association, global digital camera shipments fell 43% year-on-year in the first quarter of this year.

Loeb’s Third Point currently holds approximately 6.3% of Sony’s shares and has a market value of approximately US$1.18 billion. Loeb believes that the spin-off entertainment business will help Sony reduce debt and obtain liquidity from the subsidized electronics sector. Loeb believes that Sony has "many strong business" but "is affected by lack of focus."

Loeb said in the letter, “Many informal observers may be surprised that Sony is currently an electronic product manufacturer, and the valuation of the entertainment business is overshadowed. Let Sony's overall success maximize, we think that Sony must Change the ownership structure of Sony Entertainment." Loeb believes that Sony's entertainment sector valuation should be around 10 billion US dollars.

Earlier, Sony had split Sony Financial Holdings and let the latter conduct a listing transaction. At present, Sony still holds a 60% stake in this company. According to sources, Sony is weighing the Loeb proposal.

After hitting a record high for two consecutive years in performance losses, Sharp was forced to seek assistance from Hon Hai, Samsung, and Qualcomm and other competitors to support corporate finances. Sharp faces a 200 billion yen convertible bond that was redeemed in September and pressure to redeem 130 billion yen in bonds in 2014. Sharp said that the company has implemented a credit facility of 150 billion yen from creditors Mizuho Financial Group and Mitsubishi UFJ Financial Group. This also exhausted Sharp's 3.6 trillion yen credit line.

Sharp has been struggling to support the sale of Tokyo's office space, lower salaries and reduced investment. Last year, Sharp laid off 5,400 people worldwide. This is also the first time since 1950 to lay off employees in Japan. Sharp said that the company will continue to reduce expenses by restricting new employee recruitment, reorganizing overseas departments, and reducing capital expenditures for LCD panel business.