UPDATE 5-Sony's Stringer takes helm at ailing electronics arm

Fri Feb 27, 2009 10:27am EST

Related Topics

* CEO Stringer to replace electronics head Chubachi

* Sony reorganizes electronics businesses to stem losses

* U.S. shares rise 3.2 percent (Adds CEO quotes, background)

By Kiyoshi Takenaka and Nathan Layne

TOKYO, Feb 27 (Reuters) - Sony Corp (6758.T), facing a record loss this year, said Chief Executive Howard Stringer would take direct control of the ailing electronics arm at the center of its problems in a bid to rebuild the company's reputation for hit products.

Stringer will become company president in place of Ryoji Chubachi, who now runs the electronics division. Chubachi, an engineer who rose through the ranks, will become vice chairman.

The shake-up consolidates Stringer's control of the sprawling conglomerate and may make it easier to unite factions that analysts say have hindered Sony's ability to replicate the success of its legendary Walkman portable music player.

"This is an important first step, and perhaps, by this, the rating of management of Sony gets reassessed," Macquarie Securities analyst David Gibson said.

"Everyone kind of likes what Stringer does but knew that he was working with a tough supertanker to turn."

Sony shares trading on the New York Stock Exchange rose 52 cents, or 3.2 percent, to $16.77 on Friday morning.

Sony has been crippled by tough competition against all its major products. It trails Apple Inc's (AAPL.O) iPod in portable music and Nintendo's 7974.OS Wii in games, and is losing money on liquid crystal display TVs.

The management reshuffle comes about a month after Sony warned it would post an annual operating loss of 260 billion yen ($2.7 billion) for the year to March 31, hit by sliding demand and a strong yen. [ID:nT20158]

The maker of Bravia flat TVs outlined plans in December to streamline production and cut 16,000 jobs in the second major restructuring since Stringer, a former journalist who rose up the ranks of U.S. television network CBS, became CEO in 2005.

"It's a very difficult time, but in difficult times ... there's opportunity," Stringer told a news conference. "This today is an opportunity that I welcome to put in a new team of management to add to the excitement of our company."

Stringer also said the maker of Cyber-shot digital cameras now plans to cut costs by more than $3 billion in the year starting April 1, up from $2.5 billion announced last month.

Sony's No. 3, Katsumi Ihara, who like Chubachi has been with the company for about three decades, will move to Sony Financial Holdings (8729.T), the insurance and banking arm.

A FREER HAND

The previous structure had been designed to twin Stringer's command of TV programming and other content with Chubachi's expertise in technology to unlock value across an empire that ranges from electronics to movie making and music.

Stringer now will have a freer hand to accelerate reforms, one fund manager said.

"It's positive for Sony," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "It has to bite the bullet and needs drastic job cuts and restructuring in the loss-making television sector to turn the business around.

"A foreign CEO would fit much better for such a tough job."

As part of the overhaul, Sony plans to set up two new business groups. One will cover network-oriented products and services, such as PlayStation video game operations and Vaio personal computers. The other will handle TVs, digital cameras and camcorders.

Sony plans to make 90 percent of its electronics product categories network-enabled and wireless-capable by the year starting April 2010, moving into the direct line of fire with Apple and Microsoft Corp (MSFT.O).

The game and PC unit will be headed by Kazuo Hirai, head of Sony's video game business, while the TV, digital camera and camcorder operations will be led by Hiroshi Yoshioka, who currently oversees its TV business.

Sony will also establish one unit to develop common software and technology for the group and another to promote efficiency in manufacturing, procurement and logistics.

Some investors have doubts that Stringer can turn the company around. Sony's stock has lost more than half its value since he became CEO in 2005.

"I don't know the reason for Chubachi's stepping down," said Fujio Ando, senior managing director at Chibagin Asset Management. "But I don't expect much change from the firm just by Stringer doubling in the role of president." ($1=97.48 yen) (Additional reporting by Taiga Uranaka, David Dolan, Yuko Inoue and Franklin Paul in New York; editing by Rodney Joyce, Karen Foster and Lisa Von Ahn)

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