Sony to raise $3.6 billion in hopes of profitability
The company will sell additional shares and hold a bond offering to raise the required funds that it says will be used to help it transform "into a highly profitable enterprise."
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
As Sony looks to the future in search of profits, the company has decided it needs one important thing to make its hopes a reality: cash.
Sony on Tuesday announced that it will launch a campaign to raise 440 billion yen (approximately $3.6 billion) through a combined sale of stock and bonds. Sony says that it will raise 321 billion yen through the issuance of shares and 119 billion yen in convertible bonds.
Sony's stock and bond cash raise is designed to help the company fund its strategy for growth and profitability, the conglomerate said in a statement. The company wants to use a significant chunk of the cash to increase the production capacity in its complementary metal-oxide semiconductor (CMOS) sensors, which are used in a wide range of semiconductor products built into mobile devices and digital cameras. Sony will also use a portion of the funds to pay off debt.
Sony was once a dominant force in the tech space. Many of its products, including televisions, gaming products and devices like the Walkman music player established the company as a leader and helped it achieve billions of dollars in profits in the 1990s and early 2000s. By the start of this decade, however, the company's business started on a steep decline as the PlayStation 3 initially failed to gain traction, the Walkman was a distant memory, and everything from digital cameras to mobile devices were getting hit hard by competitors.
Sony's mobile woes have been of particular concern for the company. In October, Sony tried to shake up the division by appointing a new executive. The effort, which proved to be fruitless, came after Sony slashed its full-year smartphone sales forecast from 50 million units to 43 million. To put that into perspective, Apple sold over 61 million iPhones in its last-reported quarter, alone.
In February, CEO Kazuo Hirai outlined a new strategy for Sony that he argued would help it generate an operating profit of 500 billion yen (about $4.2 billion) by the end of its 2017 fiscal year, ending in March 2018. The feat, if reached, would be notable: the company had a 68.5 billion yen operating profit and a 125.9 billion yen net loss in its most recent fiscal year.
In order to achieve such a major turnaround, Hirai and his team will focus Sony on four key businesses: the PlayStation gaming division, Sony Pictures, Sony Music and its devices business, which includes the CMOS sensors and other components.
Sony's desire to boost spending and capacity in its devices business is in part due to the segment's rapid growth. The company's semiconductors business, which is led by CMOS sensors, was up from 336.8 billion yen in revenue during the fiscal year ended March 2014 to 496.7 billion yen this year. Its total devices business jumped from 583 billion yen to 756.7 billion yen.
The focus on devices marks a significant shift in strategy for Sony. Three years ago, in an earlier attempt to return Sony to profitability, newly appointed CEO Kazuo Hirai unveiled an initiative known as One Sony that would focus on three core divisions: digital imaging, gaming and mobile. Of that trio, now only gaming has a central place in Sony's grand vision for achieving growth, and neither the company's plan from February nor its reasons for raising new cash on Tuesday made mention of One Sony.
"The purpose of this fundraising is to secure funds to invest in growth and to strengthen Sony's financial base, in addition to securing funds for active and concentrated investment in businesses that are driving growth," the company said in a statement on Tuesday. Sony added that it plans to raise the funds in July.
Shareholders, however, don't seem pleased with the company's decision. In early trading on Tuesday, Sony shares are down 5 percent to $28.84 following news of the stock and bond offering. It's one of the few sour notes among investors who have pushed the company's shares up nearly 72 percent in the last year on hopes that Sony's turnaround efforts would ultimately work.
Sony did not immediately respond to a request for comment.