Sony to separate more units in turnaround push

[TOKYO] Sony Corp will put more businesses into separate structures, including its lucrative devices unit, as Chief Executive Officer Kazuo Hirai tries to boost accountability in his turnaround push.

Chips and batteries will probably follow audio and video into new structures, Mr Hirai said on Wednesday in Tokyo. TV manufacturing, which Sony split into a new business last year to boost autonomy and end losses, needs to be profitable to stay part of the company, he said.

Mr Hirai is targeting Sony's highest earnings in 20 years with an emphasis on games, image sensors and entertainment to underpin a turnaround. That strategy is being bolstered by a restructuring push under Chief Financial Officer Kenichiro Yoshida as the company focuses on transparency for business units and profitability instead of volume growth.

"Splitting off units doesn't mean selling them or withdrawing from a business," Mr Hirai said. "The goal is to increase the independence of each unit." Sony is on track to transform into a company that can generate 400 billion yen (US$3.4 billion) of operating profit in the 12 months starting April, Mr Hirai said, reiterating earlier comments. Earnings are expected to be 384 billion yen next fiscal year, according to the average of 20 analyst estimates compiled by Bloomberg.

"Not only is it possible, we stick with our 500 billion yen profit target next fiscal year," said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. in Singapore. "Their mid-term plans look very modest." Sony said last week earnings would reach 500 billion yen in the year ending March 2018. That's the highest since 520 billion yen in 1998, according to data compiled by Bloomberg, and about 25 times the 20 billion yen Sony is projecting for this year.

Shares of Sony rose 0.1 per cent to 3,280 yen in Tokyo on Wednesday. The stock has surged 86 per cent in the past 12 months.

Mr Yoshida's restructuring efforts are restoring credibility at the company, which he estimates has lowered its earnings outlook 15 times in the past seven years. The CFO will add the role of executive deputy president from April.

Sony last week said return-on-equity would become its primary performance indicator. The company is targeting the measure of earnings compared with shareholder equity to exceed 10 per cent for fiscal 2017, a return it hasn't achieved since posting 10.8 per cent in the 12 months ended March 2008'.

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