Sony Corporation (ADR) (SNE): Can Shareholders Light a Fire Under This Icon?

Looking to the future, Disney is using its growing cash flow to reinvest in its diverse media businesses. In October 2012, it acquired Lucasfilm for roughly $4.1 billion, giving Disney ownership of the Star Wars franchise. While the company has designs on more movies, it will likely find substantial cross-selling opportunities in its cable networks, parks, and licensing businesses.

Meanwhile, Time Warner Inc (NYSE:TWX) also had a solid year in 2012 as strength in its television and cable networks offset continued weakness in its publishing unit. For the year, the company reported flat revenue growth and a 4.4% increase in adjusted operating income versus the prior year. Time Warner’s results benefited from rising rates in its cable networks segment, as well as a solid slate of feature films in its motion pictures unit, including new installments in the Batman and Hobbit franchises.

Like Disney, Time Warner is using its strong cash flow to reinvest in content, especially original programming for its Turner and HBO units. It is also pursuing shareholder value with large share repurchases and a plan to split off its Time publishing unit, after merger discussions failed to provide compelling offers. As with the divestiture of its AOL unit in 2009, Time Warner’s business repositioning should allow management to focus on its competitive strengths in cable and motion pictures.

The bottom line

Almost every conglomerate eventually spreads itself too thin, leading to sub-optimal returns for shareholders.  After losing half of its value over the past five years, Sony Corporation (ADR) (NYSE:SNE) needs to speed up its restructuring process and rethink its mix of businesses. Given Third Point’s ability to extract value from its investments and Sony’s strong brand value, patient investors should take a long-term view and buy into this rebound story.

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

The article Can Shareholders Light a Fire Under This Icon? originally appeared on Fool.com and is written by Robert Hanley.

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