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‘Charming’ Hirai Promoted; Sony’s Stringer Plans Succession

Sony Corp. (6758) Chairman Howard Stringer’s decision to make Kazuo Hirai his top lieutenant signals the company will accelerate plans to marry its content with hardware after its products lost ground to Apple Inc. (AAPL) and Samsung Electronics (005930) Co.

In naming the 50-year-old executive yesterday to oversee all of Sony’s consumer electronics -- from PlayStation game consoles to Bravia televisions and Cyber-shot cameras --Stringer picked the only one of the “Four Musketeers” he’s been grooming who isn’t an engineer by trade. Hirai, who’s fluent in Japanese and English, was also the youngest musketeer.

The promotion will test the games chief’s ability to carry out Stringer’s vision to integrate Sony’s TVs and computers with content from the entertainment businesses. After the Walkman’s domination of portable players in the 1980s, Tokyo-based Sony lost against Apple with the iPod, failed to fend off Samsung in TVs, while Nintendo Co. (7974) took the lead in video-game consoles.

“Sony needs to reform itself from its engineering-oriented past so it’s significant that a generalist take the helm,” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “If you look at Apple, it’s not about their technology any more. It’s how they attract consumers with marketing strategy.”

Born in Tokyo Dec. 22, 1960, Hirai grew up moving back and forth between Japan and the U.S., graduating from the International Christian University in Tokyo in 1984 with a bachelor’s degree in liberal arts.

‘Loyal, Charming’

After graduation, he joined a joint venture set up in Tokyo between Sony and CBS Inc. The business later became Sony Music Entertainment Inc., Sony’s main music unit.

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

Hirai, whose hobbies include cycling, driving, as well as collecting cameras, watches, model railroads and telescopes, moved to Sony Computer Entertainment America in 1995 and became president of the U.S. unit in 1999. He was promoted to President of Sony Computer Entertainment Inc. in 2006, replacing Ken Kutaragi, developer of the PlayStation.

Hirai will head a newly created group that combines all of Sony’s consumer electronics and network services from April 1. He will also be responsible for sales and marketing, common software platforms and design operations, according to Sony.

The company cited Hirai’s ability to turn around the PlayStation games division for promoting him to the expanded role. Hirai wasn’t immediately available for an interview, according to Mami Imada at Sony.

PlayStation Profits

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 and Panasonic Corp. (6752)

Sony fell 0.9 percent to close at 2,870 yen in Tokyo yesterday. Since Stringer took over in June 2005, Sony’s stock has fallen 26 percent, almost triple the drop by Japan’s benchmark Nikkei 225 Stock Average.

The promotion vaults Hirai past Hiroshi Yoshioka as the highest-ranking executive among Stringer’s “musketeers.” The move allows Stringer, who turns 70 next year, to lighten his work and travel load as Sony prepares for an eventual leadership change at Japan’s largest exporter of consumer electronics.

“Sony’s attempt to boost synergies between its hardware products and software services hasn’t gone well. If anyone can accomplish this, it’s probably Hirai,” said Jay Defibaugh, an analyst at MF Global FXA Securities in Tokyo. “Hirai isn’t an engineer but he has an international background and good understanding of the overall entertainment industry.”

‘Complicated Company’

The board of the Tokyo-based company talked a lot about looking at talents outside Sony, Stringer said. A final decision on his succession hasn’t been made, he said.

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

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.

Yoshioka, the oldest of the “musketeers” at 58, will retain his title of executive deputy president, Sony said.

3-D TVs

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.

Since 2009, Stringer has been grooming Hirai, Yoshioka, Yoshihisa Ishida and Kunimasa Suzuki as the company’s next generation of leaders.

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.

Beating Toshiba (6502)

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., 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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