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Sony Revival Under Hirai Seen Trailing Tsuga’s Panasonic: Tech

Sony Corp. (6758)’s Chief Executive Officer Kazuo Hirai and Panasonic Corp.’s incoming President Kazuhiro Tsuga face the same challenge: reviving their companies after record losses.

The new leaders of Japan’s two largest electronics makers are both in their 50s, attended U.S. schools, and have been credited with reforming divisions of their companies. Both also face problems that won’t be easy to solve. Shares of Sony and Panasonic fell to their lowest in three decades on May 12 after the companies forecast earnings that missed projections.

Investors and analysts rate Tsuga’s chance of success as better than Hirai’s. While Tsuga, 55, is expected to speed up a shift toward solar panels and energy-saving appliances, Hirai’s strategy is less clear, said Yuuki Sakurai, chief executive officer at Fukoku Capital Management Inc.

“I see a higher chance of revival for Panasonic (6752) than Sony,” said Sakurai, who oversees the Tokyo-based firm with $7.3 billion in assets under management. “Sony still hasn’t been able to show us the path for revival.”

By contrast, Osaka-based Panasonic, which is expanding in renewable-energy appliances after acquiring solar-panel maker Sanyo Electric Co., “may do something drastic under the new president to turn itself around,” Sakurai said.

Shares Slump

Hirai, 51, who faced shareholders at the annual meeting today, has presided over a 36 percent plunge in Sony’s shares since becoming CEO on April 1. Panasonic declined 19 percent in the same period, while the broader Topix index fell 13 percent.

Nine of 21 analysts surveyed by Bloomberg recommend buying Panasonic shares, while two of 20 rate Sony a buy. Nineteen analysts look at both electronics makers.

George Boyd, a spokesman for Sony, and Yuko Hosaka, a spokeswoman for Panasonic, declined to comment on analysts’ views on their stocks or their executives.

Sony predicts net income of 30 billion yen ($377 million) this fiscal year, compared with a record 457 billion-yen loss in the year ended March 31. Its main TV operation is projected to be unprofitable after losing about 700 billion yen over the past eight years amid falling prices, a stronger yen and competition from Samsung Electronics Co. (005930) and LG Electronics Inc. (066570)

Sony fell 0.9 percent to 1,092 yen at the close in Tokyo trading, trimming its market capitalization to 1.1 trillion yen, less than a 10th of its March 2000 peak.

PlayStation Unit

Hirai, who made Sony’s PlayStation game business profitable as head of the unit, pledged in April to revive the main electronics operation by focusing on three areas: game players; digital imaging products such as Cyber-shot cameras and image sensors; and mobile devices, including tablet computers and smartphones.

Sony bought out partner Ericsson AB’s stake in their mobile-phone partnership last year.

“The only way to gain shareholders’ trust is to deliver results, one by one,” Hirai said at Sony’s annual meeting, where 9,303 shareholders gathered. “We’re determined to follow through with our strategies by making decisions swiftly and uniting Sony group together under one management.”

Hirai, a liberal arts major from Tokyo’s International Christian University who joined Sony’s music venture after graduating in 1984, promised to revive earnings by streamlining TV operations, selling a chemical unit and cutting 10,000 jobs.

Replacing Stringer

The executive, who spent part of his childhood in the U.S. and speaks fluent English, took over April 1 from Welsh-born Howard Stringer. Stringer ended his operational role today and became chairman of Sony’s board after overseeing four straight years of losses, the company’s worst streak on record.

“I’m still skeptical,” Hideto Fujino, chief investment officer of Rheos Capital Works Inc., said of Hirai’s revival plan. “It sounds like mere slogans and lacks specifics. I need to see action.”

Panasonic’s Tsuga, who became president after winning approval at the general annual meeting in Osaka today, built an “outstanding” reputation for making reforms while running the audiovisual unit, said Masahiro Ono, a Tokyo-based analyst at Morgan Stanley MUFG Securities Co.

The company also conceded making mistakes by investing too heavily in TV panels, unlike Hirai, who hasn’t criticized Sony’s past errors.

“Hirai’s never come out and said what’s wrong at Sony,” Ono said.

Panasonic Loss

Panasonic reported a 772 billion-yen loss last fiscal year as global TV shipments fell in 2011 for the first time in six years and the yen surged to a post-World War II high against the dollar, eroding overseas earnings. The company in May forecast net income of 50 billion yen for this fiscal year.

“To turn around a super-large corporation like Panasonic, the leader must be brave enough to contradict what was done in the past,” said Yoshiharu Izumi, an analyst at JPMorgan Chase & Co. in Tokyo who rates the stock overweight, the equivalent of buy. “I think Tsuga is capable of doing that.”

Panasonic declined 1.3 percent to 618 yen and is worth 1.5 trillion yen, compared with 7 trillion yen in April 2006.

“Panasonic will launch full-scale efforts to overcome a severe business environment to generate profits,” Tsuga told shareholders today.

The manufacturer, the biggest employer among publicly traded companies in Japan with 330,767 employees as of March 31, will pare its headquarters operation, aiming to make a v-shaped recovery, Fumio Ohtsubo, Tsuga’s predecessor who became chairman, said. Ohtsubo eliminated 36,000 jobs last fiscal year.

TV Reforms

Tsuga was promoted to the top job at Panasonic after taking steps to stem losses from TVs. The executive, who spent most of his career at Panasonic’s research operations, suspended three of five TV-panel factories within a year after taking charge of the unit in April 2011.

The TV unit probably will turn profitable in the fourth quarter this fiscal year after four consecutive years of losses, the company said in May.

Tsuga, who holds a master’s degree in computer science from the University of California and a bachelor’s degree in biological engineering from Osaka University, previously worked in research for DVD products and headed the automotive systems unit, said Hosaka, the company’s spokeswoman.

He formed a task force to draw up a revival plan in April, Hosaka said.

Tsuga probably will carry out “creative destruction,” Morgan Stanley’s Ono said in a June 7 report. “We are positive on the new era” because Tsuga “has a strong executive track record, having written down facilities and cut fixed costs quickly” in his former role, Ono wrote.

Ono expects the new president to continue reforms. “He’s a man of action,” he said.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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