Sony Wants $2.4 Billion From First Public Offering in 26 Years for Chip Building
Iconic entertainment producer, consumer electronics and device maker Sony wants to raise about 300 billion yen, or $2.4 billion, from selling shares priced at 3,420.5 yen each to investors in the first public offering of its stock in 26 years.
The company also is offering 120 billion yen in bonds due in 2022 and convertible shares at 5,008 yen. The common stock price offering was 3 percent lower than the closing price of Sony’s stock on Monday, July 13 on the Tokyo Stock Exchange.
Sony said it expects to net 188 billion yen from the sale of its common stock and 119 billion from the convertible bond offering. The company, which plans to increase its spending on semiconductors fourfold to 290 billion yen this year, will use the proceeds from the offerings to boost its chip-making resources.
About 51 billion yen of the net proceeds from the bond offering will be use to to fund capital expenditures in its Devices segment, 25 billion yen will go to redeem outstanding corporate bonds upon maturity and the remainder will be used to repay long-term indebtedness, Sony said.
The vendor said it expects its chip-making efforts will generate a 62 percent sales increase to 1.5 trillion yen over the next three years.
Sony president Kazuo Hirai has been positioning the company, after a long streak of losses, layoffs and restructuring, as ready to grow, specifically in areas such as smartphone camera image sensors gaming services and virtual reality equipment.
“The strategy starting from the next business year will be about generating profit and investing for growth,” Hirai said earlier this year.
And, with the vendor unable to gain any footing in the highly competitive smartphone market, investors continue to prod it to discard unprofitable business units and focus on money-making segments such as its gaming and sensor operations.
Last February, Hirai, in a clear indication of just how far he’s willing to go to make Sony profitable, disclosed plans to spin off its audio and video business into a wholly-owned subsidiary and suggested he might consider selling off its TV and smartphone units. The vendor subsequently back-pedaled from talk of selling off the smartphone business but has significantly pared its mobile handset product lineup.
Sony previously had sold off its troubled, eight-year-old Vaio PC business to investment fund Japan Industrial Partners (JIP).
Hirai’s strategy signals his belief that Sony’s road back to profitability lies in narrowing its product lineup to money-making divisions. His goal? By 2017/18, Hirai wants Sony to record some 500 billion yen ($4.2 billion) in operating profit, or a 25-fold increase from this year and the highest level since reaching 520 billion yen in 1998.
In the fiscal year ended March 30, Sony doubled its operating income to 68 billion yen, or $567 million, well ahead of analysts’ expectations of 47.2 billion. Sales increased 5.7 percent to 8.2 trillion yen, exceeding the vendor’s February outlook, and its net loss narrowed to 126 billion yen from the expected 170 billion yen.