Sony Vaio sale no panacea for troubled company

Sony's sale of its Vaio PC business to Japan Industrial Partners is a step in the right direction but it is no quick fix for the troubled company.

Sony confirmed on Thursday that it is selling its loss-making Vaio PC business to buyout firm Japan Industrial Partners (JIP), a move analysts described as a step in the right direction as the Japanese electronics giant strives to get back to profitability.

Although the terms of the sale to JIP, which is backed by Bain and Mizuho Securities, were not disclosed, the news that Sony is exiting the PC business was welcomed by analysts. 

"Globally, there are about 300 million units of PC sales," said one tech sector analyst at an investment bank, who declined to be named. "Sony has about 1% of that market -- it isn't relevant to its business in any shape or form," he said.

The PC exit is no panacea for Sony, which makes everything from cameras and game consoles to motion pictures and music. The company has already forecast that it will report a loss of Y110 billion ($1.1 billion) for the financial year ended March 2014, contrasting sharply with the Y30 billion profit it forecast in October.

Analysts note that aside from its financial services business, Sony is struggling in most of its other business divisions, including TVs and mobile phones.

For the first nine months ended December 2013, the company posted a net profit of Y11.1 billion ($110 million) but this was buoyed by its financial services unit. Excluding that, it would have posted a net loss of Y35 billion. "If you remove contributions from the insurance business -- which is listed separately -- Sony is loss-making. In reality, it is weak at the core," the bank analyst said.

Moody's last month cut Sony's credit rating to junk (Ba1) from Baa3, citing the challenges the group faces in stabilising its profitability.

The saturated PC market's struggles has resulted in increased deal flow from that sector as companies seek to exit the business or diversify. Lenovo, the world's largest PC maker, made in January more than $5 billion of acquisitions in servers and handsets.

Sony's sale of Vaio came amid a flurry of mergers & acquisitions in January. According to Dealogic, Asia Pacific M&A volume reached $42.3 billion in January, which was the first time on record that it had surpassed January M&A volumes in Europe, the Middle East and Africa.

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