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Sony reportedly planning to divest Vaio PC division

06 Feb 2014  | Zewde Yeraswork

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Sony is in talks with investment fund Japan Industrial Partners on the sale of its Vaio PC brand, Japanese financial newspaper Nikkei reported. Sony would own a small share in the new company to be formed should the estimated $490 million transaction come through, according to the report. The negotiation rumours arise amid the declining performance of the PC market in competition with mobile products.

According to Nikkei, the sale of the business would lead to disposal losses that could put Sony in a position of net loss for the first time in two years. Sony, earlier this week, denied reports that it plans to sell Vaio to Chinese OEM Lenovo. The Japanese company, however, also acknowledged that it plans to revise its strategy for Vaio by looking at various options.

"The PC market is shrinking; the margins are razor thin; Sony's PC brand image has slipped in recent years; Sony is not a leader in the market; [and] like other high-tech companies that have fallen from market leadership, Sony needs to retrench and focus on the products and markets that it can become a dominant player [in].

McGregor made it clear that Sony no longer has any reasons to hold on to the PC business," Jim McGregor, founder and principal analyst for Tirias Research, told EE Times.

"The PC is no longer the magnet platform for new technology on applications. When it was, it was worth being in PCs just to be working with the latest technology. The magnet platforms are now in mobile and servers. The best option is to sell the group to another PC vendor and hopefully minimise the expenses of doing so. I'm sure that there are a few Chinese or other Asian vendors that may be interested in acquiring Sony's PC group," McGregor said. He identified the investment fund possibly looking to purchase the business as a "Japanese private equity firm that obviously sees some value in the group if they can get it for the right price."

Craig Stice, senior principal analyst at HIS, agreed that behind Sony's dilemma there is the overall PC market's slump. "The entire market has been down for the last year and a half or so due to the rise and popularity of media tablets," he said. Noting that Sony has never had a huge market share, Stice pegged the Japanese company's market share at steady the low single digits. "1.9 per cent worldwide to be exact," fairly low compared to HP, Dell, or Asus, he added.

Noting that Sony previously made comments that they are in the restructuring stage for its VAIO PC division, this is "not a huge surprise," Stice said.

Unlike McGregor, Stice believes that there are a few reasons why Sony should be holding on to Vaio. "Their brand and their legacy of PCs have been around for a while," he said. "They do well in Japan. They do have a name for themselves. They are one of the few vendors out there that has a complete line-up of electronic devices from TVs to cameras to PCs... People know Sony, they understand it."

Stice speculated that Sony might still try to keep a piece of Vaio even after selling most of it to the investment fund. Sony may be in talks with Lenovo for that purpose, he said.

Sony's sales and operating revenue in the second quarter of 2013 were $18.12 million, an increase of 10.6 per cent, compared to the same quarter a year ago. Sony's operating income in the last quarter decreased to $151 million, compared with $166 million a year ago. Sony was scheduled to announce the third quarter earnings on Feb. 5.

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