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Sony Splinters Apart -- Which Could Be a Good Thing

NEW YORK (TheStreet) -- Sony (SNE - Get Report) consists of some divisions that are spectacularly successful and others that are spectacular failures. The result is usually "meh." But a big shakeup is in the works.

The company reported what seemed like a great December quarter from Japan early today. Sales were reported at $22.979 billion, up 24% from a year before, and operating income was reported at $860 million, up 94.6%.

But Sony admitted this was due entirely to the yen, which fell from an average value of ¥81.2 to the dollar a year ago to ¥100.5 to the dollar this year. On a constant currency basis, sales were up only 5%. And the great December quarter was due to a single, hot product, the PlayStation 4 video game machine. Game sales were up 33% on a constant currency basis, with profits of $172 million, even after a $59 million write-off of some old PC game titles.

So, on balance, "meh" again. Or maybe "yech."

That's because the full year ending in March should see a nearly $300 million shortfall, rather than the roughly $300 million profit Sony had been anticipating before its latest earnings release. The company could lose $1.1 billion in all.

Shares actually fell on the release, with the ADRs trading in the aftermarket at around $15, down nearly $1 per share from their closing price the day before.

Asked about Sony in October with the shares trading near $20, our own Jim Cramer said "I'd take a pass on that one." He seems to have been right.

The big news came in a separate release, where CEO Kazuo Hirai, who previously headed the gaming unit, said Sony will sell its money-losing PC business and carve out the TV business into a wholly owned subsidiary, cutting 5,000 jobs by the end of March.

The Vaio PC unit will be restructured through an investment company called Japan Industrial Partners, with the hope that a sale will be complete by the end of June. Sony will contribute 5% of the new company's operating capital, and it will hire just 250 to 300 of Sony's current employees in areas like planning and design.

When you take out PCs and TVs, Sony becomes an investment again. The PlayStation franchise is very profitable. Sony Music is the world's second-largest music publisher. Sony Pictures is the fourth-largest movie studio by market share. Its TV unit is the dominant producer of game shows and other daytime TV, and it has a vast library of re-runs acquired from a variety of producers going back to the 1950s.

Analysts had been hoping that the company would sell the studios, but it seems that Hirai has decided to keep what's making money and finally admit defeat on the things that were losing money.

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