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Sony set for leadership transition

CEO shuffle raises questions about studio's place in conglom

Once he takes the CEO baton from Howard Stringer, Kazuo Hirai’s biggest challenge will be finding new ways to mesh Sony Corp.’s electronics portfolio with its entertainment assets.

The marriage of hardware and showbiz software has proved complicated for the Japanese conglom in the more than two decades since it purchased Columbia Pictures, sparking on-and-off rumors that the U.S. showbiz assets could be spun off into a separate entity.

Those rumors will only accelerate with Wednesday’s announcement of Hirai’s elevation from exec deputy president to the prexy and CEO post, succeeding Stringer, who will stay on as board chairman. Unlike Stringer, Hirai has no background in filmed entertainment, though he began his career in 1984 as a marketing exec for the Japan arm of CBS Records (which Sony acquired in 1988). He’s best known for turning around Sony’s PlayStation business.

But some observers think the company is better placed than it’s been in a long time to get a shot at consumers as rapid change opens up opportunities and Sony’s once disparate fiefdoms have started working together.

Mike McGuire of consulting firm the Gartner Group said he met recently with members of Hirai’s team “and one of the big messages they were trying to get across is creating a unified kind of experience in the interaction between Sony properties,” he said.

The Sony Entertainment Network has become a hub for the company’s movies, music, video, games and services — its own and with partners. “They showed us what amounted to a unified look and feel for the different devices and ways to access them. They’d been promising to do it,” McGuire said, and seem to be delivering. The diverse group of execs all reported to Hirai — not to various divisional heads as in the past.

The precise strategy has yet to be articulated — whether PlayStation will become the clearinghouse for entertainment and social interaction much as the Xbox 360 has for Microsoft; how Sony’s links with Google Television will continue to evolve. Wall Streeters and industry players are hoping for some clarity from the company’s quarterly earnings call from Tokyo today, when it is expected to confirm an earlier forecast for a fourth-straight year of net losses, as well as its eighth straight year in the red for its core TV set biz.

It will be the company’s first public comment since Hirai’s elevation to succeed Stringer, who will stay on and become chair of the board of directors in June, when current board chairman Yotaro Kobayashi retires.

Sony didn’t address any changes to its corporate reporting structures in announcing Hirai’s ascent, to take effect April 1. For now, Sony Pictures Entertainment topper Michael Lynton continues to report to Stringer.

Lynton declined to comment on the CEO changeover. A person close to the studio said it’s expected to be “business as usual.” The person said Lynton and Hirai have known each other for a long time. They’ve served together on several executive committees and “have a good comfort level” with each other.

The studio’s also been a steady earner, claiming 15 years in a row of profitability.

Sony Pictures has a high-profile slate for 2012 including “Men in Black 3,” “Total Recall” and “The Amazing Spider Man.”

Stringer, who turns 70 in a few weeks and said he said started succession planning with the board three years ago, called his successor, known as Kaz, “a globally focused executive for whom technology and the cloud are familiar territory, content is highly valued and digital transformation is second nature.”

While complimenting Stringer on his “strong leadership” during his seven years at the top, Hirai, 51, outlined his own program for the electronics giant’s future: “To drive the growth of our core electronics businesses — primarily digital imaging, smart mobile and game; to turn around the television business; and to accelerate the innovation that enables us to create new business domains.”

He added that the new management team’s focus would be on finding ways to “fully leverage Sony’s diverse electronics product portfolio, in conjunction with our rich entertainment assets and growing array of networked services, to engage with our customers around the world in new and exciting ways.”

In addition to Hirai’s appointment, Sony announced the promotion of Tadashi Saito to exec veep and chief strategy officer. He had been head of its Device and Solutions Group and its Semiconductor Business Group.

Hirai, who was anointed as Stringer’s successor after shaking up Sony’s once-troubled game operation and being promoted to head of the consumer products and services division last March, will have his work cut out for him: Sony has a corporate worth about one-fifth what it was at the turn of the millennium as it lost out to Apple, Samsung and other competitors.

Stringer came to Sony in 1997 to run its U.S. entertainment business after a distinguished career including 30 years at CBS. He was named chairman-CEO in 2005 with great fanfare and set about trying to break down the silos that developed between divisions and to a certain extent remake the corporate culture. The job called on his considerable charm and fortitude, requiring grueling travel between New York, Tokyo and the U.K. as well as Sony’s divisions and plants around the world.

But the competition intensified, hitting the core TV business in particular. Sony, which invented the Walkman, was lambasted for letting Apple dominate the portable music space.

Stringer has been criticized for not turning things around fast enough.

But getting the company’s far-flung units on the same page was a big deal, said Gartner’s McGuire. Compared to the bunker-mentality at the company in the 1980s and ’90s, “it’s a tremendous accomplishment that they acknowledge each other’s existence,” McGuire said.

“As challenging as times are for Sony now, were it not for the strong leadership of Sir Howard Stringer these past seven years, we would have been in a much more difficult position,” Hirai said.

But Sony’s been talking about convergence for long time — now investors want to see it. Years of promises are one reason the stock didn’t react much to the news, which had been anticipated. Sony shares ended ended the day in New York down slightly — off 0.16% at $18.90. The stock has plunged from its 52-week high of $36.97.