Sony Corporation (SNE - Analyst Report) is preparing to sell off its Vaio personal computer (PC) business to a private investment fund company, Japan Industrial Partners, according to a report published in The Nikkei Asian Review. Though company personnel were not available for confirmation, markets are betting big on the news, given the investors’ positive reaction.
Per the report, the under-performing PC business will be sold for approximately $391 million to $489 million (40 billion yen to 50 billion yen). Sony is likely to retain a minority stake in the business.
The company has been intending to reform its business for quite some time as the PC business has remained sluggish. In the second quarter of 2013, the company revealed that the annual sale guidance for Vaio had been revised down to 5.8 million units from the earlier expectations of 6.2 million units for fiscal 2013.
The decline in the PC business is due to increasing competition from countries like China and a shift of consumer preference from PCs to tablets and smart phones. Moreover, per a research by Gartner, this trend is likely to grow at an increasing pace.
The sale of this division is thus, a part of Sony’s strategy to transform itself and relocate its assets towards more lucrative Mobile, Game and Digital Imaging businesses.
The business is expected to fall under a new unit of Japan Industrial Partners that will continue to manufacture Vaio PCs. Apart from producing; the unit will also be responsible for the aftermarket sales service. Sony might consider closing out the business in overseas markets to have undivided focus on the home market.
Besides some employees, most of Vaio’s staff will become a part of Japan Industrial Partners. The development and production of the PCs are likely to continue at Sony’s existing Research and Development (R&D) site- Nagano Prefecture.
The sale of the PC business is likely to have a negative impact on Sony’s earnings for the year ending on Mar 31, 2014. The company had expected yearly profit of $29.1 million (30 billion yen) previously, which after this deal, would amount to significant net loss for the company in the current fiscal.
However, the market reacted positively to the speculated news and the company’s stocks soared up 5.57% in yesterday’s trading session.
With this news on the table, we are waiting for the release of the company’s fiscal third-quarter 2013 results tomorrow, on Feb 6.
Sony currently holds a Zacks Rank #4 (Sell). Other better–ranked stocks in the industry worth considering include Logitech International SA (LOGI - Analyst Report) and Harman International Industries, Inc. (HAR - Analyst Report) , both carrying a Zacks Rank #1 (Strong Buy) and Skullcandy, Inc. (SKUL - Snapshot Report) carrying a Zacks Rank #2 (Buy).