Sony Shares Fall, Stringer Takes Control

Shares of Sony closed the Tokyo session about half a percent lower Monday after the electronics maker said CEO Howard Stringer would double up as president and directly oversee the electronics division at the centre of its problems.

Current President Ryoji Chubachi, who now runs the division, will become vice chairman as part of the management reshuffle announced on Friday.

Sony Building
Shizuo Kambayashi
Sony Building

The shake-up consolidates Stringer's control of the sprawling conglomerate and may make it easier to unite factions that analysts say have hindered its ability to develop hit products.

Shares of Sony fell 0.48 percent to 1,660 yen, but outperforming the Nikkei 225 Average, which was down 3.8 percent.

Nikko Citigroup raised its rating on Sony to "buy/high risk" from "hold/high risk", citing expectations for accelerated restructuring after the management shake-up, and it raised its target price for Sony shares to 2,200 yen from 2,100 yen.

But other analysts including Credit Suisse's Koya Tabata were not convinced that the shift would automatically be a solution to Sony's problems such as growing inventory, a high cost structure and fragmented operations.

"We remain unsure about whether consolidating control into the hands of Chairman Howard Stringer will change the business model significantly and fundamentally strengthen Sony's operations," Tabata wrote in a note to investors.

He kept his rating on Sony at "underperform" with a target price of 1,000 yen.

Welsh-born American Stringer will be the first foreigner to head Sony .

The problems in electronics, including losses in TV operations, are a main reason Sony is tumbling into its first annual net loss in 14 years.

New Team

Stringer, 67, on Friday introduced a team of four younger executives, three of them in their 40s—including Kazuo Hirai, 48, head of Sony's game unit—to spearhead efforts to bring together Sony's sprawling empire, spanning TVs, games, movies and semiconductors, to develop products and services for the digital age.

At a news conference at Sony's Tokyo headquarters, Stringer acknowledged Sony had not been quick enough, and had lost to American rivals like Apple as well as Asian ones like Samsung Electronics.

And Sony had to do more to integrate its hardware gadget strengths with software businesses like Internet services, video gaming and movies and other entertainment content, he said.

"We must drive change along several fronts," Stringer told reporters. "We must regroup and rationalize our important core electronics product business. We must accelerate the introduction of innovative network product and service offerings."

PlayStation 3
PlayStation 3

But besides references to the company's PlayStation 3 businesses, such as the "Home" virtual community, and Net-linking TVs and other such devices, the executives offered little that was overly specific or surprising.

Sony's gaming business has had mixed results, and some analysts say the PlayStation 3 hasn't fared as well as it should have against Microsoft's Xbox 360 or Japanese rival Nintendo's hit Wii console.

But Stringer said his younger Internet-savvy team, whom he called "the four musketeers," would help realize a transformation toward a more competitive, lean innovative and nimble Sony.

"All these four executives are very familiar with the digital world," said Stringer. "We have a whole range of customers who want something different."

Hirai, the chief of Sony Computer Entertainment, will head the Internet-linking products and services group with Kunimasa Suzuki, 48, formerly head of Sony Electronics in the U.S. Hiroshi Yoshioka, 56, now head of TV operations, and Yoshihisa Ishida, 49, president of the Vaio computer group, will lead a new consumer products group that brings together Sony's TV, digital imaging, home audio and video businesses.

Sony is particularly vulnerable to a strong yen because exports make up about 80 percent of its sales.

Sony is expecting a 150 billion yen ($1.5 billion) net loss for the fiscal year through March.

The last—and only—time Sony reported a loss, for the fiscal year ending March 1995, the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls.