Forging a new chapter in the annals of global corporate history, Sony Corp. of America topper Howard Stringer was named chairman-CEO of the giant Japanese conglom, replacing Nobuyuki Idei.
The stunning move, a rare instance of a foreigner tapped to run a major Japanese company, was approved during an emergency meeting of the Sony board in Tokyo and announced late Sunday.
Given the insular nature of Japanese business and Sony’s lofty place in the national pantheon, the promotion surprised even those who have admired Stringer and his swift ascent up Sony’s corporate ladder. Most recently, he was named vice-chairman.
Sony’s No. 2, prexy Kunitake Ando, also will ankle, replaced by executive deputy president Ryoji Chubachi.
Stringer, a Welsh-born U.S. citizen and former CBS news topper, was chosen over heir apparent Ken Kuturagi, Sony’s executive deputy president who’s known as “the father of PlayStation.” Kuturagi resigned from Sony’s board, as did Idei, Ando and four other directors.
Sony said formal appointments will be made June 22, but “the management transition will start immediately.”
The shakeup came after months of internal rivalries and a sharp downturn in Sony’s electronics business, which makes up 70% of Sony’s revenue. Idei, 67, took much of the blame. He and Stringer have been close, and Idei is said to have suggested Stringer as his replacement.
Stringer’s candidacy may have been aided by his outsider status, as Japanese execs found it hard to agree on a new leader from within their own ranks.
Chubachi a key player
Stringer will depend heavily on Chubachi, an engineer who was named president of Sony Corp. and CEO of Sony Electronics, to help orchestrate a turnaround in that biz.
“Howard’s good at setting strategies, empowering people, inspiring them and making tough decisions — he doesn’t have to be in the labs making the devices,” one insider said.
“This is a pivotal year for Sony Corp. and this new structure will enable the company to streamline its operation and provide a more cohesive focus for operating its businesses around the world in a proactive and strategic manner,” Sony said in a statement.
Stringer, who will shuttle between Sony’s New York and Tokyo headquarters, will continue to oversee Sony’s U.S. entertainment businesses — meaning the heads of Sony Pictures Entertainment and Sony BMG Music still will report to him.
However, given Stringer’s expanded duties. a larger role is seen for SCA chief financial officer Robert Wiesenthal and general counsel Nicole Seligman.
Stringer’s new posting is likely to make it easier for the U.S. entertainment arm to expand and acquire assets without jumping through as many corporate hoops. The acquisition of MGM, for instance, instead of a simple deal, became a complex transaction involving five partners, largely due to financial trepidation among bosses in Japan. The long-rumored spinoff of SPE into a separately traded public company may also be easier if and when such a move seems logical.
Stringer also will have the authority to hasten the convergence of hardware and software that Sony’s been chasing for years.
“It killed him that Apple has a $35 billion market cap based on a digital version of the Walkman,” said one insider, referring to Apple’s iPod and Sony’s original landmark product. Sony now has its own device, but it came late to the market because of clashes between the music and electronics divisions.
“Sony has an unparalleled legacy of boldness, innovation and leadership around the world. Together we look forward to joining our twin pillars of engineering and technology with our commanding presence in entertainment and content creation to deliver the most advance devices and forms of entertainment to the consumer,” Stringer said in a statement.
“I am grateful to Mr. Idei and to Mr. Ando for the confidence they have shown in me, and the Sony board of directors for their support,” he added.
The politically astute and internationally savvy Stringer will face a Herculean task in bridging disparate cultures, although he already has proved himself a skilled mediator between Sony’s patriarchal mindset and Hollywood.
Up to the task
Stringer may be remarkably suited for this job, at which others have failed miserably, including Vivendi with Universal and Matsushita Electric with MCA.
Stringer’s ascent to the Sony throne signals the strength of the entertainment divisions he has shaped and guided –compared with the conglom’s flailing electronics biz.
The decision to leave Stringer, who recently turned 63, in New York also signals that Sony realizes just how important the U.S. is to the company’s worldwide operations.
Sony surely is banking on Stringer to work the same sort of magic he has within the entertainment divisions on the company’s electronics concerns.
Wall Streeters, along with competing entertainment execs, have taken note of Stringer’s smart management choices, which include tapping Michael Lynton as chair of Sony Pictures Entertainment. He also chose Andrew Lack, a former TV colleague, to run the music side.
Solid at dealmaking
Stringer has proved a deft and persistent negotiator at the acquisition table. He played a key role in one of the biggest corporate moves for Sony in recent years: its place atop the consortium that is acquiring MGM for $4.8 billion. He closed that deal not just through entertainment savvy, but by convincing his bosses in Tokyo, including Idei, that MGM added synergies on the electronics side of the business, such as boosting Sony’s Blu-Ray high-definition DVD format.
Stringer also helped engineer Sony Music’s merger with music giant BMG.
Stringer will be taking the top spot at the conglom at a time of stagnation. Overall sales were down 7.5% last quarter, and company in December lowered its revenue and operating income forecasts for the fiscal year ending in March.
On the other hand, the entertainment units Stringer heads, most especially Sony Pictures, are its only growing assets. Led by boffo DVD sales for “Spider-Man 2” and “Seinfeld,” Sony Pictures’ operating income was up 232% last quarter, and revenue rose 12%. Its electronics business, meanwhile, saw flat revenue and a 23% drop in operating income, while vidgames were off even more.
The movie studio boasts it has had a remarkable four-year run. Since February 2000, some 20 of Sony’s films have been profitable, not to mention the “Spider-Man” franchise. Recently, “Hitch” broke box office records for a romantic comedy.
Nevertheless, Stringer is taking a job that mostly involves selling TVs and PlayStations. Electronics made up 70% of Sony’s revenue last quarter and vidgames another 13%. Film and TV was just over 9% and company’s 50% stake in Sony BMG Music even less.
Search for synergies
Finding better synergies between Sony’s booming entertainment unit and its struggling electronics business likely will be a top priority. Besides being slow on the uptake in the digital music space, where it had a natural advantage, there has thus far been virtually no integration of its vidgame division, which manufactures the world’s top-selling game console, with its entertainment assets, despite growing crossover between the two industries. Sony Pictures even licenses its top titles to other vidgame publishers instead of to Sony Computer Entertainment.
Stringer likely will try to address those problems by using the library assets of Sony Pictures and MGM, as well as partner Disney, to boost Blu-Ray over the competing high-definition DVD format HD-DVD, which is backed by Toshiba and counts Paramount, Universal and WB as supporters. Blu-Ray also will be integrated into the next-generation PlayStation console. Sony owns most of the patents in Blu-Ray, meaning its success in the market could be very lucrative to the conglom.
Stringer also had a hand in recent moves to boost Sony’s profile in digital entertainment. Last year he appointed vet tech exec Phil Wiser as chief technology officer for Sony Corp. of America and charged him with heading up efforts in online music and video, where it has thus far found no success.
“The seamless integration of our hardware and content businesses is vital to Sony’s success,” Stringer said at the time, perhaps indicating how he may use his skills atop the entire Sony Corp.
Idei has held the top job since 1995, when he was chosen over more than 10 contenders. He was hand-picked by Norio Ohga, who succeeded Sony founder Akio Morita.
In Japan, the news sent Sony shares up in trading. Two minutes after the Tokyo market opened, Sony was up 50 yen, or 1.3%.
(Ben Fritz in Hollywood contributed this report.)