Corporate News
A shopper walks past Sony logos at an electronics shop in Tokyo on June
30, 2015. Image sensors, a key high-tech component in digital cameras
and smartphones, have emerged as one of Sony's strongest lines alongside
its PlayStation videogames unit. PHOTO | YOSHIKAZU TSUNO |
AFP
By RITSUKO ANDO
In Summary
- The firm has long been plagued by losses in branded goods like smartphones, hit by fierce competition from both cheaper rivals in Asia and industry giants like Apple Inc and Samsung Electronics Co.
Japan's Sony Corp plans to raise nearly $4 billion
via new shares and bonds to plough into image sensors as it reinvents
itself as a niche component maker, pulling back from consumer goods like
TVs that dragged it into losses.
In Sony's first new share issue in 26 years, the firm said
on Tuesday it expects to raise 321 billion yen ($2.62 billion) from a
public stock offering after a rally that has seen its market value
double in a year. It will raise a further 119 billion yen from a
convertible bond issue to fund a boost in sensor output capacity at its
advanced plants in Japan.
Worth close to a tenth of its current market value,
the share issue provides the clearest signal yet that Chief Executive
Kazuo Hirai is prioritising the sensor business to anchor Sony's
turnaround. The firm has long been plagued by losses in branded goods
like smartphones, hit by fierce competition from both cheaper rivals in
Asia and industry giants like Apple Inc and Samsung Electronics Co.
The image sensors, a key high-tech component in
digital cameras and smartphones, have emerged as one of Sony's strongest
lines alongside its PlayStation videogames unit, helping the company
recover from a long slide in TV and smartphone sales. Still, Sony is
only just emerging from decline, booking a net loss of 126 billion yen
in its latest fiscal year, though it expects a profit of 140 billion yen
in the current year.
The move caught investors by surprise on Tuesday,
with fears the new stock will dilute per-share earnings sending the
stock 8.3 per cent lower at the close. Yet the company's market value
has climbed in step with its recent recovery progress, and has more than
doubled since June 2014 to close to $35 billion.
"In addition to securing funds for active and
concentrated investment in businesses that are driving growth," the
company said in a statement. "Sony ... aims to secure its ability to
make future further investment."
Unlike videogames, developing sensors requires a
consistently heavy drain on capital expenditure with Sony's balance
sheet already stretched as it restructures, selling or splitting off
loss-making operations and slashing jobs.
Despite Tuesday's shares drop, Takatoshi Itoshima,
chief portfolio manager at Commons Asset Management, said the move was
seen as more positive by longer-term investors.
"It's positive that it is investing in the sensor
business which is seen promising," he said. "But short-term investors
may question the strength of its balance sheet, or wonder whether the
company could've slashed more of its businesses before raising money
from the market."
Sony had previously flagged smaller-scale
commitments to expand in sensors. It said in April that it would spend
45 billion yen to bolster sensor production capacity this fiscal year,
on top of a 105 billion yen investment announced in February.
A Sony executive recently told Reuters that demand for sensors was now so strong that it was struggling to keep up.
Tomoyuki Suzuki, head of Sony's device solutions
business, which includes image sensors, said earlier this month he
expected sensor sales to grow by nearly a quarter to 550 billion yen in
the year ending March.
By contrast, the company has forecast sales at its
TV business to fall around 6 per cent to 1.16 trillion yen. Despite its
previous losses from TV operations, Sony has said it's keen to maintain a
presence in the business, not least as a means to promote brand
awareness among consumers.
-Reuters-
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