By Mariko Yasu and Shunichi Ozasa - Jun 27, 2012 2:54 AM GMT+0700
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 May 12 after the companies forecast earnings that missed projections.
Kazuo Hirai, president and chief executive officer of Sony Corp. Photographer: Tomohiro Ohsumi/Bloomberg
Fumio Ohtsubo, incoming chairman of Panasonic Corp, left, shakes hands with Kazuhiro Tsuga, incoming president of Panasonic Corp., during a news conference in Osaka, Japan. Photographer: Tetsuya Yamada/Bloomberg
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.
‘Outstanding’ Reformer
As the two new leaders prepare to face shareholders at annual meetings today, Hirai, 51, has presided over a 35 percent plunge in Sony’s shares since becoming CEO on April 1. Panasonic declined 18 percent in the same period. 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 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. and LG Electronics Inc. (066570)
Sony fell 2.9 percent to close at 1,102 yen in Tokyo trading yesterday, 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.
“Now is the time for Sony to change,” Hirai said at an April 12 business policy briefing. “Everyone at Sony is coming together to make this happen, and as a result Sony will change.”
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 is ending his operational role today and becoming 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 is likely to become president after winning approval at the general annual meeting in Osaka today, has 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 percent to close at 626 yen yesterday and is worth 1.5 trillion yen, compared with 7 trillion yen in April 2006.
The manufacturer, the biggest employer among publicly traded companies in Japan with 330,767 employees as of March 31, eliminated 36,000 jobs last fiscal year and may further streamline operations, it said May 29.
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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