Kazuo “Kaz” Hirai is stepping down as Sony’s CEO in April and will be replaced by Kenichiro Yoshida, the company’s chief financial officer who has long been seen as Hirai’s right-hand man.
Hirai has served the company as CEO since 2012, taking over from Howard Stringer. He will continue to serve as chairman of the company’s board of directors.
Analyst Comment
We first reported on Hirai, in February 1997, when he was COO of Sony Entertainment in the US. His rise to CEO was based largely on his huge success with the PlayStation which he took over in 1999. He then became head of the CE business in 2011, going on to become President and CEO in February 2012.
Hirai has certainly done a good job in re-aligning the company around the segments that he set out when he made his first talks as CEO. After just a month as CEO, he highlighted games, mobile and digital imaging and the company has done well in two of those segments. We always saw him as being, probably, frustrated by the way that his success with PlayStation was dragged down by the TV business. We thought of Sony’s cutback in its TV business as ‘Hirai’s Revenge’. At IFA 2012, Hirai made clear in his speech that TV had been reduced in priority.
In February 2014, the company said that it would spin-off its TV business and get out of PC as part of this re-alignment. At the time, we were sceptical that Sony could make a sustainable business by just being in the premium segment – not because Sony was not good enough, but because we thought it was probably impossible. However, the business has survived so far and, as part of the home entertainment and sound business in Sony, it is around 14% of the business.
Sony’s revenue by segment – image:Meko – click for higher resolution
The chart shows that there are two segments that are not really pulling their weight in terms of profit, Sony Pictures and the mobile business. Sony’s share price rose after Hirai’s announcement as investors speculated that his successor might sell off the Sony Pictures business, which Hirai has been reported as previously resisting. I have been saying for more years than I care to count that while Sony has said that owning both a device and content business was a big advantage. I’ve been saying that Sony has yet to demonstrate this! In fact, I have argued that the interests of device makers and content owners are often in strong opposition. Content makers want to control distribution, but for device makers, restrictions reduce the potential for volume.
The other point that this chart raises is the depth of the problems in the mobile space. Although it was identified as a key business for Sony, it is barely breaking even and it seems unlikely to change that quickly. That won’t be news to the new CFO, who has been described as ‘no nonsense’, so it will be interesting to see how the company evolves its mobile strategy. (BR)
