Sony Corporation (ADR) (SNE): A Fight In The Land Of The Giants

Netflix, Inc. (NASDAQ:NFLX) is, essentially, working to become a television station on the web. With more and more companies looking to stream video, it wants to differentiate itself in a rapidly maturing market by offering top-quality content. If Netflix pulls off the transition from broad content to in-demand content, it could very well continue increasing its subscriber base.

That said, while customer rolls and revenues continue to increase, the company’s expansion efforts have been burning a lot of cash. Increasing content costs could make that situation even worse. Investors appear to be betting on Netflix’s first mover advantage based on the recent share price advance. Momentum investors should look here, but most others would be better off sitting on the sidelines.

While the Getting is Good

Sony Corporation (ADR) (NYSE:SNE), meanwhile, should soon be going back to the market with an expiring content distribution deal. That could mean a nice boost for Sony’s entertainment arm. It would also be a nice support for the company while it tries to right the ship on the consumer products front. That’s the hill Loeb must climb, though the company appears to be at least listening to his request.

That said, it doesn’t make sense for a company trying to fix one division to get rid of another that is helping to fund the turnaround. Add in the conglomerate culture in Japan and Loeb may be taking on a fight he can’t win.

Sony Corporation (ADR) (NYSE:SNE) shares jumped on the news, but will likely come back to Earth as investors realize this is, most likely, a long fight with an uncertain outcome. Sony remains a turnaround play for more aggressive investors, though now probably isn’t the right time to buy in. Be patient. Longer term, if Sony Entertainment gets spun off, investors of all stripes should take a good look at it.

The article A Fight In The Land Of The Giants originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple, Netflix, and Walt Disney. The Motley Fool owns shares of Apple, Netflix, and Walt Disney. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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