Sony will not spin off its entertainment business--which includes the company's PlayStation sector--the Japanese technology giant has announced. Billionaire and major investor Daniel S. Loeb originally proposed the idea in May.
Following a unanimous vote from Sony's board of directors, the company sent a letter this week to Loeb's Third Point LLC outlining why continuing to own 100 percent of the entertainment business is "fundamental to Sony's success."
The company also said that Third Point LLC's plan for an initial public offering of Sony's entertainment business is "not consistent with the company's strategy for achieving sustained growth in profitability and shareholder value."
More specifically, Sony said in its letter to Third Point LLC that demand for entertainment content is increasing in value, due in part to the rise and proliferation of connected mobile devices. Sony said its entertainment business will "increasingly benefit from these trends" and that the company's shareholders will benefit from owning all, as opposed to a portion, of the assets.
In addition, Sony said having full control of its entertainment business "drives internal collaboration, facilitates synergies, and allows the company to be more nimble." If Sony were to spin off its entertainment business, the company runs the risk of "burdensome" intercompany relationships, the letter states.
"We are encouraged by our progress as we continue to execute on our One Sony strategy," Sony CEO and president Kazuo Hirai said in a statement. "We have made many changes during my tenure as CEO, and we are confident that we are on the right path."
"Sony's entertainment businesses are critical to our corporate strategy and will be important drivers of growth, and I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses," he added. "We are determined to pursue sustained growth in profitability and shareholder value, so that we can meet and exceed the expectations of all of our stakeholders."
For more, check out Sony's full letter to Loeb and Third Point LLC.
Loeb--who owns a 6 percent stake in Sony worth about $1.1 billion--proposed in May that the company spin off its entertainment business by selling as much as 20 percent of its assets in an initial public offering. He argued that this move would allow Sony's electronics division to thrive.