Shares of Sony Corp outperformed those of its rivals in a sliding market on Monday, as CEO Howard Stringer's move to directly oversee the electronics arm at the center of the firm's problems raised investor hopes for speedier restructuring.
Current President Ryoji Chubachi, the current Sony No.2 and head of the electronics division making Bravia flat TVs, Cyber-shot digital cameras and Handycam camcorders, will become vice chairman in the reshuffle announced on Friday.
It is the latest in a series of management changes at Japan's top exporters in recent months including Toyota Motor Corp and Honda Motor Co Ltd as they grapple with a widening recession.
Eliminating layers and rebuilding a system so that he can lead the business himself is not a bad decision, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
Now it's up to Stringer's capacity as a top-down manager. If he can lead the company effectively, recovery would be quicker.
Sony, which runs a long way behind Apple Inc's iPod in portable music and Nintendo Co Ltd's Wii in video games, is set to post an record operating loss of 260 billion yen ($2.7 billion) for the year to March 31, with problems in its electronics unit largely to blame.
Shares in Sony closed down 0.5 percent at 1,660 yen, outperforming the Tokyo stock market's electrical machinery index, which lost 3.2 percent.
Sony stock fell 69 percent in calendar 2008, compared with a 54 percent decline in the subindex.
Nikko Citigroup raised its rating on Sony to buy/high risk from hold/high risk, citing expectations for accelerated restructuring, and it raised its target price for Sony shares 5 percent to 2,200 yen from 2,100 yen.
We see evidence of a new importance being attached to speed and detect a readiness to reform, Nikko Citigroup analyst Kota Ezawa said in a note to clients.
One of the top priorities for the new management is to stop bleeding red ink in its TV operations, which have been losing money in recent years despite Sony being the world's No.2 LCD TV maker behind Samsung Electronics Co Ltd.
Stringer's ties with the electronics division are not as close as those of Chubachi, who has been with the unit through his career at Sony, making it easier for Stringer to take drastic steps with the TV operations -- including withdrawal, Akino said.
As part of the overhaul unveiled on Friday, Sony plans to set up two new business groups, one of which covers network-oriented products and services such as PlayStation video game operations and Vaio PCs, with the other handling TVs and digital cameras.
Sony plans to make 90 percent of its electronics products categories network-enabled and wireless-capable by the end of March 2011.
This strategy, the company's recent move to shed its manufacturing assets and the fact that Stringer is replacing Chubachi, a seasoned engineer, suggest Sony is transforming itself to a software-oriented company like Apple, Daiwa Institute of Research analyst Kazuharu Miura said.
Apple does not put a cutting-edge microchip in the iPod, and touch screens are not exactly new technology. But it expanded its market share with improved user-interface and applications such as iTunes, Miura said.
Sony is probably heading toward that direction.
Miura warned, however, the shift comes with a considerable risk for a company that has prided itself on manufacturing prowess.
If the transformation failed, it would lose everything. It's like crossing the Rubicon, Miura said.
The company sold some microchip output facilities and it may also sell some other electronics components assets. It is likely to shed hardware-related engineers. Once such steps are taken, there's no going back.
(Reporting by Kiyoshi Takenaka, Mayumi Negishi and Nathan Layne; Editing by Hugh Lawson)