Sony to Sell Chemical Unit Amid Major Overhaul at Electronics Firm

March 22, 2012
The planned sale comes after Standard & Poor's last month downgraded Sony, citing poor earnings, falling demand and fierce competition.

Sony (IW1000/33) said Thursday it was selling its chemical products division for a reported sum of nearly $500 million as part of a major overhaul at the struggling electronics and entertainment giant.

Sony, which is grappling with giant losses and fierce competition from the likes of Apple, said the Development Bank of Japan was buying the unit, which makes films used in liquid-crystal display (LCD) panels and other products.

Sony did not divulge the sale price but the Nikkei Business Daily said the government-backed lender may pay as much as 40 billion yen (US$480 million) for the unit, which is part of Sony Chemical and Information Device Corp.

Sony, which said it was aiming to complete the sale within the year, said its chemicals arm no longer fits into a restructuring plan that includes a management shakeup and the buyout of its Sony Ericsson mobile phone venture.

"[Sony] believes that this transaction would be the optimum solution for Sony, DBJ and the chemical products businesses themselves," it said in a statement.

The unit, which has about 3,000 employees across Japan, the United States, Europe and China, had sales of 111 billion yen for the year to March 2011 -- a small fraction of Sony's 7.18 trillion yen in revenue in the same period.

Mizuho Investors Securities analyst Nobuo Kurahashi said Sony was expected to dump more non-core assets.

He said, "It is important to get rid of what is not necessary, but this [strategy] will not affect core management issues at Sony that have been dragging the company down with losses."

"Sony's main problem is that it's unable to increase its earnings by improving the competitiveness of its core businesses," Kurahashi said.

Some analysts have said the iconic Japanese firm must adopt deeper restructuring measures as it continues to lose money at its mainstay television business, but generates substantial profits from electronics parts.

The planned chemical division sale comes after credit rating agency Standard & Poor's last month downgraded Sony, citing its poor earnings, falling demand and fierce competition.

Sony has blamed difficult trading conditions in developed-country markets, the impact of severe flooding in Thailand and the high yen for its weak balance sheet.

The credit downgrade followed news the firm was shedding its Welsh-born U.S. chief executive Howard Stringer -- replaced by his 51-year-old protege Kazuo Hirai -- and said it expected to lose a whopping 220 billion yen by March for a fourth consecutive year in the red.

Reports on Thursday said Sony was shaking up its U.S. entertainment business ahead of Stringer's departure, while Hirai would focus on trying to bring its core Japanese electronics division back to profitability.

Hirai has given few details about Sony's future reorganization plans, but he said last month there was a "sense of urgency" and that little would be ruled out in efforts to reshape the company.

During the Stringer years, the firm that made the revolutionary Walkman has suffered a number of setbacks. Mobile phones are challenging its key games division -- which also suffered an embarrassing hacking attack last year.

There are huge losses in Sony's TV business as competition intensifies and profit margins shrink, and piracy threatens its music and film assets.

At the end of last year, Sony extricated itself from a joint LCD-making venture with South Korean electronics giant Samsung after about seven years, hoping for greater flexibility in sourcing components.

Copyright Agence France-Presse, 2012

See Also:

Sony's Stringer Steps Down as President, CEO

Sony, Toshiba and Hitachi to Merge LCD Businesses

About the Author

Agence France-Presse

Copyright Agence France-Presse, 2002-2024. AFP text, photos, graphics and logos shall not be reproduced, published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP shall not be held liable for any delays, inaccuracies, errors or omissions in any AFP content, or for any actions taken in consequence.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!