Sony Corp. reported a higher than expected first-quarter operating profit on Thursday, boosted by strong sales of smartphones in Japan and rising shipments of image sensors to phone makers.
The bump in profitability may not be enough to please activist shareholder Daniel Loeb, whose New York-based Third Point hedge fund is proposing Sony spin off as much as one-fifth of the company's entertainment assets.
Also read: Daniel Loeb Slams Sony Entertainment Execs for Summer Flops, Poor Oversight
The maker of PlayStation game consoles and Bravia TVs logged an operating profit of $369.68 million in the April-June quarter, exceeding analyst expectations. The company posted an operating profit of $64.25 million in the same period last year.
"While movies, music and the financial business are providing stable profits, the biggest challenge that we face is the rebirth of electronics and returning that division to profitability," Chief Financial Officer Masaru Kato told reporters. "With that in mind, I believe this result is adequate."
Japan's Nikkei newspaper has reported that Sony's board is expected to reject Loeb's proposals, with directors arguing that the electronics company could compete better by maintaining ties with its entertainment arm.
Also read: Sony Board Supposedly Leaning Toward Rejecting Entertainment Spin-off Proposal
Sony CEO Kazuo Hirai told shareholders last month the company's board would carefully consider Third Point's suggestions. Kato declined to comment further on Thursday, except to say: "This is a very important proposal and we will respond after thorough discussion."
In a letter to investors this week, Loeb praised Hirai's efforts to stem the red ink in Sony's electronics business by cutting overhead and streamlining its range of products.
But Loeb, who owns around 7 percent of Sony, called the entertainment division poorly managed and repeated his earlier calls for Sony to bring more transparency and accountability to those divisions.
"A resurgent electronics combined with a well-managed, publicly listed entertainment business would make for a stronger Sony and offer tremendous value for shareholders," he said.
Loeb is credited with forcing change at Yahoo, where he accusing then-CEO Scott Thompson of padding his resume with a non-existent computer science degree. Thompson was out within weeks.