Months after Sony Corp bought So-net Entertainment Corp, the broadband provider’s chief chided CEO Kazuo Hirai for having his “priorities in the wrong order.”
He told Hirai his focus should be on restructuring the struggling electronics conglomerate rather than spending time and effort buying a firm it had previously spun off, a person familiar with the exchange said.
That was two years ago, and Hirai was sufficiently impressed to hire Kenichiro Yoshida as Sony’s chief strategy officer. Within months, he was promoted to chief financial officer (CFO).
Yoshida, a reserved foil to the more flamboyant “Kaz” Hirai, has since sought to turn around Sony with a no-nonsense program of cuts and targeted expansion that has won over investors, even as the Tokyo-based conglomerate prepares to post a sixth loss in seven years.
Yoshida is pushing each Sony division to take more responsibility for its performance, a direction that insiders say Sony is likely to confirm in a new multi-year business plan to be unveiled on Wednesday.
STRAIGHT-TALKER
Colleagues say Yoshida’s low-key demeanor conceals a straight-talker who is unafraid to ask tough questions.
Under Yoshida’s knife, Sony sold its ailing Vaio personal computer division, a seismic shift for the group, as this was an established, 17-year-old brand. He spun off the TV business and axed thousands of jobs across the company, while raising spending on imaging sensors, a profitable segment and likely future profit driver.
Yoshida’s overhaul is not only being felt in Japan; it has rattled Sony’s traditionally autonomous Hollywood big shots.
Late last year, he pressed Sony Pictures Entertainment Inc CEO Michael Lynton to give “serious consideration to modifying the Entertainment executives’ compensation plans,” e-mails leaked by hackers in November last year revealed. Lynton confided to studio co-chair Amy Pascal that he felt he was under “enormous pressure.” Pascal has since left the company in the wake of other embarrassing e-mails disclosed in the hack.
The Yoshida shake-up seems to be paying off.
Sony this month reported stronger-than-expected quarterly results, forecast a smaller net loss for the year to next month than previously expected and reversed a forecast operating loss to a profit.
Some analysts believe Yoshida is striving to get Sony’s mobile business back in the black with an eye on a possible sale. Sony declined to comment for this article.
Sony shares have risen more than 70 percent since Yoshida was named CFO in April last year — including a 28 percent run-up in the past month that was missed by activist investor Daniel Loeb, who said in October last year he sold his Sony stake after failing to persuade management to sell part of its entertainment business.
Under Yoshida, Sony’s five-year credit default swaps, the cost of insuring its debt against default, have halved.
Jefferies Group LLC analyst Atul Goyal, who has a “buy” recommendation on Sony, last week raised his target price by 15 percent to ￥4,050. The stock closed on Friday at ￥3,220.5.
With Yoshida as CFO, “Sony has responded more quickly to the changing environment and competition,” Fitch Ratings Inc director Kelvin Ho said. “It’s been able to make more bold decisions.”
GROWTH OPPORTUNITIES
Yoshida has injected a sense of urgency, Ho added, but to return Sony to investment grade — Fitch still rates its debt a speculative “BB-” — the company needs a broader base for profits.
Ho and others say the real test for Yoshida would be in securing long-term sales growth rather than merely making Sony profitable again.
Aside from an announced increase in production capacity of image sensors, used in smartphones and security cameras, analysts say Sony’s best growth opportunity ahead might be in making better use of its PlayStation Network to attract consumers beyond videogame players, with better movie and music services.
Sony has fumbled to emulate the success of Apple Inc’s iTunes platform, and recently said it was ending its own Music Unlimited service, offering music through Spotify Ltd instead. For Yoshida, the challenge might be in continuing that search while keeping costs under check.
“Given the sharp recovery in the stock price, the CFO may need to watch out for senior executives relapsing into grand expansionary visions,” Goyal said.
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