Most people of my generation know Sony as the company of the Walkman and neon yellow headsets that we used to wear in the "80s. It was the definition of cool. It was a giant in the consumer electronics world that obviously fell on hard times in the three decades since then, as Apple surpassed it.div > div.group > p:first-child">
Six years ago, Kaz Hirai replaced Howard Stringer as Sony CEO. Unlike Stringer, Hirai was a Japanese Sony insider who was very charismatic. He took over Sony at a time where there were no expectations. The company was in the $20 billion to $30 billion market-cap range — and was kind of an afterthought in the tech world. Sony"s peak market cap was around $180 billion in the late "90s before the dot-com crash.
Hirai has very ably led the company through a very significant turnaround that — in the last five years — has led to a 231 percent gain in the stock. The shares are now worth more than $60 billion, yet it still doesn"t get much attention on business TV or in Hollywood compared with most of its competitors.
Sony has really executed its turnaround in the shadow of the bigger American tech companies that typically have a $400 billion to $700 billion market cap. You"re talking about a company that, even after this phenomenal comeback in the last five years, is only one-tenth the size of the big tech gorillas. I understand why it gets ignored, but I don"t think it should be for much longer.
There were some interesting things that came out of Sony"s earnings results nearly two weeks ago. It was another good set of numbers — the biggest quarterly profit in Sony"s history. It also raised its guidance for the year. Perhaps the biggest announcement was that Hirai would be stepping down as of this April, and he"s going to be succeeded by longtime CFO Kenichiro Yoshida.
Although Hirai deserves full credit for what the company"s done under his watch, a lot of investors have showered praise on Yoshida for his role in the turnaround.
Yoshida"s elevation to the CEO role now has sparked a lot of speculation about what this means strategically to Sony and which divisions he may sell off.
There are a number of divisions at Sony today.
Most investors give a lot of the credit for Sony"s turnaround to Yoshida. One of the things that he did when he came in was to put more transparency on each of those divisions. The outside world and investors were aware of divisional goals — that"s sparked a lot of improvement.
Yoshida also spearheaded selling off lesser-performing divisions. He got out of the personal computer business. He took write-downs where appropriate, including last year with Sony Pictures. The pictures division is riding a big hit this year with "Jumanji," which was 20-year-old Sony IP.
Like most executives at Sony, Yoshida"s been there a long time. Before the CFO role he had a bunch of different roles, and one of the interesting things is that his successor as CFO is going to be someone he worked with closely in his last stint prior to getting the CFO job. So Yoshida"s elevation is part pat on the back for a job well done and part a doubling down on his turnaround strategy.
Yoshida said in his introductory news conference that directionally not much would change, but there would be some subtle differences. That"s sparked a lot of conversation in the media about what that means, and if he would look to unload the Sony Pictures division. That"s a division that they did a strategic review on two years ago, and Hirai reaffirmed Sony"s desire to keep the division.
But does Yoshida continue to believe in that division the same way Hirai did? There"s a lot of other moving parts in the media world right now, with Fox selling its assets to Disney. The conventional wisdom is that the number of studios is going to shrink. Most expect Sony would be a natural seller.
I am skeptical of this view however. Sony bought Columbia Pictures back in the "80s. There"s always been a chorus of criticism that it"s been an absentee landlord and it would make sense for it to sell it off. But you have to look at the original vision Sony had for that (and buying the music publishing business): You meed hardware and software to really delight the customer. That"s really no different from Nintendo"s view today -- or Apple"s. And look at all the other companies running to be in the content business today.
Sony"s vision from the "80s still makes sense and it has a great set of assets to pull it off — with the right management. Rather than sell off the pictures division, watch instead for Sony to divest the mobile phone and financial services divisions.
There"s some intriguing ways Sony could be an even bigger player in media in the years ahead. It would not at all surprise me if Sony was in the mix to buy Lionsgate, for example. What could it do with some of its cable assets internationally? What is it going to do with Crackle, its free over-the-top way of distributing its video content today? How much more IP is there from old movies, shows and games, which it could develop into films — like "Jumanji"?
Sony lurks in the shadows compared with most media names. It doesn"t get as much attention as the bigger FANG names. But it continues to execute quarter after quarter. I"ve got a lot of confidence in Yoshida going forward
Keep your eye on Sony.
Disclosure: Affiliates controlled by Eric Jackson hold a long positions in Sony, Nintendo, Disney, Vivendi and Apple.
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