Why It’s Time for Sony Corporation (ADR) (SNE) to Break Up

Page 1 of 2

Sony Corporation (ADR) (NYSE:SNE)Breaking up is hard to do. It can be the hardest decision you make in your personal life. Things were once hunky-dory, but have since gone sour. This is the dilemma facing Sony Corporation (ADR) (NYSE:SNE) and investment banker Daniel Loeb’s proposal to break up the company.

With his investment firm Third Point LLC already buying a $1.1 billion stake in Sony Corporation (ADR) (NYSE:SNE), Loeb now wants Sony to spin off its entertainment and music business and look at developing the electronics side of the company. This comes off a supposed “$100 billion lost decade,” as described by Bloomberg News, in which the company has been lagging behind similar companies in stock and profit performance, namely Apple Inc. (NASDAQ:AAPL) and Samsung.

Part of the reasons for this lag has been Sony Corporation (ADR) (NYSE:SNE)’s inability to modernize and adapt, which is ironic considering that the company was one of the first to bring Japan out from its World War II destruction and turn the nation into an electronics and technology powerhouse in the 1960’s. This trend continued when Sony created the Walkman a couple decades later, ushering in a new era of listening to music. In fact, it can be argued that Apple Inc. (NASDAQ:AAPL) owes its survival in the 2000s to Sony Corporation (ADR) (NYSE:SNE)’s early development, from which the iPod was a result of a natural progression in music. Sony then expanded into entertainment with the very successful Sony Pictures, creators of the new Skyfall and a host of other movies. Let’s not forget the PlayStation dynasty, still considered the gold standard for serious gamers.

It’s this varied success, however, that is the reason why a break-up may be good for Sony Corporation (ADR) (NYSE:SNE). While its entertainment division is very strong, it’s electronics and gadgets that have always been Sony’s bread and butter, and the difficulty Sony Corporation (ADR) (NYSE:SNE) has had in this field is why the company hasn’t been performing at the levels that its rivals in the industry have. According to Bloomberg News, the company’s enterprise value sits at only 4.2 times analysts’ estimated earnings before deductions at $21.4 billion, which is less than half as strong as competitors, which tend to sit at around 8.9 times estimated earnings. This doesn’t paint a good picture for Sony’s future if it continues its less-than-stellar valuation trend.

When a company struggles like the way Sony Corporation (ADR) (NYSE:SNE) has, it may be time to consider change. For example, Blackberry has the same problems trying to stay with Apple Inc. (NASDAQ:AAPL)’s iPhone and Google’s Android, despite being one of the first real smartphone makers that came out. During this year’s Super Bowl, it released a supposedly revolutionary new phone called the z10, and the stock rallied briefly before cooling off in March, although it is still higher than it was before the Super Bowl. Such a decision to stick to its guns and make phones is what will make Blackberry a serious competitor in the tech world and a good addition to investors’ portfolios.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!