Sony Corporation—Is the Sum Greater Than the Parts?
In 2013, Third Point LLC, a hedge fund based in New York, became the largest owner of Sony Corporation (Sony) shares. In May 2013, Daniel Loeb, CEO of Third Point, sent a letter to Sony President and CEO Kazuo Hirai with a proposal for restructuring Sony. The proposal included two main items: (1) Take public a 15-20% stake in Sony Entertainment, and (2) Focus on industry-leading businesses to bring growth to Sony Electronics. Sony replied that it was not interested in selling the entertainment division. According to a Sony spokesperson, “The entertainment businesses are important contributors to Sony’s growth and are not for sale. We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.”
The primary teaching objective is to develop greater understanding of how to evaluate the strategic logic of a corporate strategy. Sony has grown from humble beginnings to a huge company competing across a diverse set of businesses. Does the strategy make sense? Why did Sony enter the entertainment industry, a notoriously difficult industry for outsiders? Are all of the major businesses better off by being owned by Sony? Would any of the businesses operate more profitably if they were spun off or sold to another firm? The case can also be used to examine the role of shareholder activist and to better understand the structure of diversified companies in Japan.