Reuters, Bloomberg: Sony announces that it will establish Sony Semiconductor Solutions Corporation ("Sony Semiconductor Solutions") to further reinforce this business, and concentrate on sustained growth in image sensors, its primary business focus. R&D, business control, sales and other operations related to the semiconductor business, which are currently overseen by business groups and R&D units within Sony Corporation, will be transferred to Sony Semiconductor Solutions. The new company will aim to commence operations on April 1, 2016. In February 2015, Sony outlined its intention to sequentially split out the business units currently within Sony Corporation and operate them alongside existing Sony Group companies. The aim of these measures is to ensure clearly attributable accountability and responsibility from the perspective of shareholders, management policies with an emphasis on sustainable profit generation, and the acceleration of decision-making processes and reinforcement of business competitiveness. The decision to establish Sony Semiconductor Solutions forms part of this strategy.
Terushi Shimizu, currently Deputy President, Device Solutions Business Group, Sony Corporation, is expected to be appointed President, Sony Semiconductor Solutions. Sony Semiconductor Corporation (President: Yasuhiro Ueda) and Sony LSI Design Inc. (President: Makoto Ishii), which cover Sony's semiconductor manufacturing and design operations respectively, will become subsidiaries of Sony Semiconductor Solutions.
The Devices segment, including Sony Semiconductor Solutions, battery and storage media businesses, will continue to be overseen by Tomoyuki Suzuki, Executive Deputy President and Corporate Executive Officer, Sony Corporation.
I don't buy this completely. All of the above aims can be achieved by divisionalising entities within a group. One would possible do this if there were specific risk associated with the division that you wanted to ring fence but everyone would be requiring some kind of parent guarantee anyway so it doesn't really work. Another more feasible explanation for me is that it a precursor to some form of a sale (I suspect other units will be spun off soon as well) or possible the management of the division are planning a buyout some time down the road. Another less likely option would be a partnership of sorts or possibly that the entity will be able to obtain easier financing now that its not weighed down by the group. Otherwise this type of thing is just making money for consultants and not making any difference to operational performance. Of course the real reason is probably some tax incentive because tax drives 90% of group structures these days.
ReplyDeleteIts always a mix of reasons.. accountability of non-performing groups is one of them. The other is easier financing for performing ones (image sensor business). Lobbying efforts of Image sensor business management to create separate entity are yielding results now. Nobody wants his/her earned pie to be eaten by others - as simple as that.
DeleteNot so simple. Different business models often require different organizational structures. A separate organization does enable more rapid decision making and more rapid adaptation to changing business conditions. It also helps with a sense of identity and responsibility. If it was just about money, cost-center accounting methods could be implemented, and probably already were.
DeleteWell if management were lobbying I'd definitely not be surprised if they turn around with a leveraged buy out just as Sony hits a cash crunch. Operationally everything can be managed virtually (believe me I know I have direct experience of this in a large group) you can even call yourself something completely different and still be part of the same entity. Things like this only happen when investment bankers are involved and usually have very little to do with operations.
DeleteI guess smart people are not wiling to join a subsidiary company, not Sony. Salary is also generally lower.
ReplyDeleteto get ready to be sold to China
ReplyDeleteThe device and semi divisions have little synergy. Splitting them will maximize shareholders' values.
ReplyDeleteHow? Now they need two Boards and various sub committees. A separate audit with greater materiality so you can bet they'll load that fee. Probably have to set up new insurance (harder to cross subsidise) and banking. I'm not a Japanese tax expert but I would imagine losses would be ring fenced. If you let shareholder have shares in each I'd agree but you still have Sony as the holding company so as a shareholder all you'll see are more costs. There's a transaction down the road for sure.
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