Sony Promotes Games-Division Chief Hirai as Possible Successor to Stringer

Sony Corp. (6758) promoted gaming chief Kazuo Hirai to oversee a new unit combining cameras, televisions and other consumer electronics, paving the way for him to succeed Howard Stringer as chief executive officer.

Hirai, credited with turning around the PlayStation consoles business in his over four years in charge, will also run the Bravia TV business and the Vaio laptop computer business from April 1, Stringer told reporters in Tokyo today. Stringer said Hirai is gaining the “leadership position” to replace him and the company could still consider more candidates for the three positions he holds - of CEO, president and chairman.

The promotion of the 50-year-old Hirai signals that Stringer may be preparing for retirement after almost six years battling Apple Inc. (AAPL) and Samsung Electronics Co. Hirai, a 27-year Sony veteran, is the only non-engineer among Stringer’s so- called “Four Musketeers,” his nickname for his top lieutenants. He slashed the cost of making PlayStation consoles to boost profitability.

“Hirai looks like he’s got the inside track to be Stringer’s successor,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo. “Stringer must have valued Hirai’s performance in turning around Sony’s game division.”

Photographer: Kimimasa Mayama/Bloomberg

Kazuo Hirai, seen here as president and chief executive officer of Sony Computer Entertainment Inc.. Close

Kazuo Hirai, seen here as president and chief executive officer of Sony Computer Entertainment Inc..

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Photographer: Kimimasa Mayama/Bloomberg

Kazuo Hirai, seen here as president and chief executive officer of Sony Computer Entertainment Inc..

‘Complicated Company’

Hirai’s appointment takes him past Hiroshi Yoshioka as the highest-ranking lieutenant of Stringer, who turned 69 last month. The appointment may lighten his work and travel load as Sony prepares for an eventual leadership change at Japan’s largest exporter of consumer electronics.

The board of the Tokyo-based company talked a lot about looking at talents outside Sony, Stringer said.

“Since we promoted many young executives, I think it will be destructive to bring an outside player. It will be destructive to the morale and it will be destructive to performance,” he said. “It’s a very big, complicated company. Coming in from outside isn’t easy.”

Hirai was not available to respond to Bloomberg’s interview request, according to Mami Imada at Sony.

Sony fell 0.9 percent to close at 2,870 yen in Tokyo, its fourth consecutive decline, as the benchmark Nikkei 225 Stock Average dropped 1.5 percent.

Fluent in English

As part of the overhaul, Sony will combine all consumer electronics and networked-service functions under the umbrella of Hirai’s Consumer Products & Services Group, it said. Broadcast and professional products, as well as components such as batteries and chips, will be part of the Professional & Device Solutions Group under Yoshioka, it said.

Hirai was named representative corporate executive officer and executive deputy president. He will also be responsible for sales and marketing, common software platforms and design operations, according to the statement.

Hirai, fluent in Japanese and English, started his career at a joint venture between Sony and CBS Inc., now called Sony Music Entertainment Inc., in 1984. He moved to the U.S. games division in 1995 and became its chief in 1999. In 2006, he was promoted to president of Sony Computer Entertainment Inc., replacing Ken Kutaragi, the developer of the PlayStation.

PlayStation Drive

The company last month reported third-quarter earnings that exceeded analysts’ estimates after the PlayStation games division’s profit more than doubled. That cushioned a slump in TV prices, which had also eroded earnings at Samsung Electronics Co. and Panasonic Corp. (6752)

Yoshioka, who currently oversees the consumer products group that includes TVs and camcorders, will retain his title of executive deputy president, Sony said.

“This new organizational and management structure is intended to enable Mr. Stringer to continue to implement his group-wide strategic vision, while also empowering the next generation of Sony’s management to focus on current operations as well as long-term growth and development of the company’s core businesses,” Sony said.

According to people familiar with the matter in November, Sony planned to search for a new president who could eventually succeed Stringer. Hirai and Yoshioka were the leading internal contenders, the people said at the time.

Hirai is “loyal on one hand and well educated in the convergence products and I think he has a charming personality,” Stringer said.

The Musketeers

Since 2009, Stringer has been grooming four executives as he pushes Sony’s divisions to marry hardware products with film, TV, game titles and music from the company’s entertainment businesses. With the exception of Hirai, Sony’s “musketeers” are all engineers by trade. The other “musketeers” are Yoshihisa Ishida, head of TVs, and Kunimasa Suzuki, who leads Sony’s Vaio personal-computer operations.

Stringer replaced division leaders to spur cooperation and cut 30,000 jobs to revive earnings. Sony has been trying to boost sales by promoting 3-D products and being first in offering Internet-oriented TVs that run on Google Inc. (GOOG) software and Intel Corp. (INTC) chips.

Stringer travels frequently between his main office in New York, Sony’s Tokyo headquarters, the movie division in Los Angeles and London where his family lives. He said in 2009 he wanted to remain on the job until Sony completes its business plan ending in March 2013.

Oldest ‘Musketeer’

Yoshioka, the oldest of the “musketeers” at 58, has overseen the consumer products group that includes TVs, stereos, DVD and Blu-ray players and camcorders.

Stringer, who holds master’s and bachelor’s degrees in history from Oxford University, joined Sony in 1997 after a career spanning two decades at CBS. The Welsh-born U.S. citizen became chairman and CEO in 2005 after winning the endorsement of his predecessor, Nobuyuki Idei, who oversaw the loss of more than 60 percent of Sony’s market value over five years as Apple and Samsung gained market share.

Stringer scored a victory over Toshiba Corp. (6502), which abandoned its HD DVD technology in 2008, handing the high- definition video market to Sony’s Blu-ray. It was the entertainment industry’s largest format tussle since VHS beat Betamax in the 1980s.

Stringer also oversaw the biggest recall in the consumer- electronics industry in 2006 when some of the company’s batteries overheated. He led Sony during the company’s first back-to-back annual losses since its listing. Under Stringer, the company’s flagship PlayStation 3 was outsold by Nintendo’s Wii, and sales of Amazon.com Inc.’s Kindle trumped those of Sony’s rival electronic-book reader.

Under Akio Morita and Masaru Ibuka, who co-founded Sony in 1946, the company created Japan’s first transistor radio and the world’s first compact disc player. Morita’s admirers included Apple founder Steve Jobs, according to John Sculley, former CEO of Apple.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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