What Sony Corporation (ADR) (NYSE:SNE) shareholders have to hope is that Kuzuo Hirai is their company’s answer to Yahoo! Inc. (NASDAQ:YHOO)’s Marissa Mayer.
The idea is that Mayer, as a technologist, has been bringing Yahoo! Inc. (NASDAQ:YHOO) back to its roots. So Hirai, who made his reputation in Sony Corporation (ADR) (NYSE:SNE)’s games unit, is doing the same for that company.
The two leaders have something else in common, Daniel Loeb of Third Point pushing them to partly spin-off assets. In Mayer’s case, that was a 40% stake in Alibaba, the Chinese online merchant, which she has since cut to 20%, giving some of the cash back to shareholders and plunging the rest into an acquisition spree aimed at turning the company into a cloud applications outfit.
Sony: Movies our Alibaba
In Sony Corporation (ADR) (NYSE:SNE)’s case, it’s the company’s U.S. entertainment assets, Columbia Pictures, Sony Pictures, and Sony Music. Loeb wants a spin-out into an entity controlled by Sony, through a semi-independent board, that would raise the capital Sony needs to get back into the consumer electronics race.
But unlike Yahoo!, which held a broad front of assets in media and applications before Mayer took over, Sony Corporation (ADR) (NYSE:SNE) has only one card to play in consumer electronics – its Playstation game console. There are indications of good news there, as its decision to let people keep playing games they own on the PlayStation 4, in contrast to Microsoft Corporation (NASDAQ:MSFT)’s (MSFT) more closed approach on its Xbox One, drew raves from the press.
But we’re still only talking about the press, not the market. Both companies are still in pre-launch mode on Amazon.com, and both are making happy noises. PC Magazine, which has been reading the tea leaves, gives an early edge to Sony Corporation (ADR) (NYSE:SNE), but how much of an edge and how that will translate to the bottom line won’t be known until Christmas.
Yahoo’s numbers better, but not yet great
Meanwhile, what Sony shareholders own is a marginally profitable company with a run rate of roughly $60 billion per year in sales. The company did manage to eke out a profit of roughly $100 million in its most recent quarter.
But its success in squeezing out costs and squeezing out profits still pales compared with Yahoo!, which is now turning 15 cents in every dollar it takes into profit. Still, Yahoo! is not nearly so large as Sony. It could probably fit into one corner of the Japanese company’s offices, being well under 10% as large by revenue.
Both companies retain the bigger problems they had before their new leaders took over. Yahoo! is still not getting organic growth – its stock gains are entirely due to the 20% of Alibaba it continues to own.
Similarly with Sony – the company is still chasing profits in the TV business, where it was passed long-ago by Samsung. Its phone unit, now wholly owned, also follows in the wake of the larger Samsung. Its Vaio line remains tied to Microsoft Corporation (NASDAQ:MSFT), which is not a good place to be as tablets replace PCs. And despite anything that may be happening around entertainment, TVs and phones remain where Sony’s sales volumes lie.
The Foolish call is Yahoo!
So it’s possible that Hirai is indeed Sony’s Mayer. But that is not necessarily proof of success. The foolish play here remains Yahoo!, given Sony’s enormous exposure to products it can’t make money on. Just as Mayer needs to deliver on the top line, Hirai needs to deliver in products before claiming real success.
If Hirai can make more than the Playstation a hit, however, the leverage exists there to make some serious coin. It’s just not the way to bet.
Dana Blankenhorn owns shares of Yahoo!. The Motley Fool has no position in any of the stocks mentioned.
The article Will Hirai Be Sony’s Mayer? originally appeared on Fool.com and is written by Dana Blankenhorn.
Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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