Sony Names Hirai as Head to Succeed Stringer Amid TV Losses
The promotion of Hirai will test the games chief’s ability to integrate the unprofitable TV business and computers with content from its entertainment divisions. After the Walkman dominated portable players in the 1980s, the Tokyo-based company lost to Apple with the iPod, failed to fend off Samsung in TVs and saw Nintendo Co. (7974) take the lead in video-game consoles.
“Sony won’t change, whoever becomes president,” said Mitsushige Akino, who oversees $600 million at Ichiyoshi Investment Management Co. in Tokyo. “Sony chose a foreigner, but that didn’t change the company. That proves how difficult it is. Sony has to show what the action plans are to convince investors.”
The maker of Bravia televisions, Vaio computers and PlayStation game consoles scrapped a projection for a profit and said in November it may have a 90 billion-yen ($1.2 billion) loss in the year to March. Sony, which reports third-quarter earnings tomorrow, hasn’t had four consecutive years of losses since it was listed in 1958.
“The path we must take is clear -- to drive the growth of our core electronics businesses,” Hirai said in the statement.
Hirai, with backgrounds in the music and gaming industries, will head a company whose stock slid by more than half since Stringer took the helm in June 2005.
Sony fell 1.9 percent to 1,364 yen in Tokyo trading today, before the announcement. The stock slumped 53 percent last year, lagging behind a 26 percent jump for Apple (AAPL) and an 11 percent gain for Suwon, South Korea-based Samsung.
“It was my honor to recommend him to the board for the positions of president and CEO, because he is ready to lead, and the time to make this change is now,” Stringer said in the statement.
Hirai was one of the top four executives Stringer was grooming and the only one who isn’t an engineer by trade.
The Japanese company is revamping the main TV business that is forecast to lose money for an eighth consecutive year because of a strengthening yen against the dollar and euro, and competition with Samsung.
Sony, which exited a display-panel venture with Samsung and bought out partner Ericsson AB’s stake in their mobile-phone partnership, has introduced new tablet computers and game consoles to take on Apple and try to revive profit.
“Hirai is a gentleman so the market will think he can’t execute radical changes,” said Ryosuke Katsura, analyst at Mizuho Securities Co. “The biggest issue is even if he can turn around the TV business, the market is questioning how much he can do.”
Hirai was born in Tokyo on Dec. 22, 1960. He grew up in Japan and the U.S., graduating from the International Christian University in Tokyo in 1984 with a bachelor’s degree in liberal arts.
After graduation, he joined a joint venture set up in Tokyo by 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 last year.
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.
Sony’s rating was cut by Moody’s Investors Service last month and Fitch Ratings in December, with both citing the difficulty of turning around the unprofitable TV business. Moody’s, which assigned a negative outlook to Sony, also downgraded Panasonic Corp. (6752)’s rating.
Sony has been hobbled by a stronger yen that reached a postwar high, waning sales, a Japan earthquake that crippled factories and Thailand flooding that cut production. Its November prediction of 90 billion yen in losses in the year ending in March reversed an earlier forecast for a profit of 60 billion yen.
Sony, worth $100 billion in September 2000, is now valued at $18 billion, compared with Cupertino, California-based Apple at $425 billion.
The maker of Bravia TVs lowered its annual sales projection to 20 million sets from 22 million and said it was taking a 50 billion-yen charge for streamlining the TV operation.
The company is countering with plans to write down the value of some facilities, reduce the number of models and cut expenses at its marketing units.
“I have unflagging resolve” to turn the TV business around, Hirai said in November. Sony’s management “feels a sense of crisis” about the unit’s losses, he said.
Since 2009, Stringer was grooming four executives as he pushed Sony’s divisions to marry hardware products with film, TV, game titles and music from the company’s entertainment businesses.
Stringer replaced division leaders to spur cooperation and cut 30,000 jobs to revive earnings. He traveled frequently between his main office in New York, the company’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 a business plan in March 2013.
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