NEW YORK (TheStreet) -- By ending its dividend, Sony (SNE) - Get Report acknowledged it has serious problems in consumer electronics. The only way for CEO Kazuo Hirai to end those problems and save his company is to jettison those businesses.

But history stands in his way.

Sony was created and built by the late Akio Morita, the Steve Jobs of Japan. Morita-san did not run his company in a Japanese way. He innovated -- with transistor radios in the 1950s, TVs in the 1960s, Betamax tape in the 1970s to Walkman tape players in the 1980s. Morita's Sony set standards and earned premium prices.

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Sony was the first Japanese company to list on the New York Stock Exchange. Its decisions to buy Columbia Pictures and then CBS Records could have been taken by no other Japanese company of the time.

When Kazuo Hirai became CEO in April, 2012, the failures in consumer electronics were plain. TVs had become flat panels that didn't need replacement. The electronics business had moved to China, where costs are lower.

Hirai seemed to understand this in February, setting plans to spin off the TV business and sell the PC business. Hirai called it his "One Sony" strategy. But he has been moving slowly.

Now the ship has sprung another leak. The smartphone business is failing. The company now expects to lose $2.14 billion this fiscal year and has cancelled its dividend, taking a huge "impairment charge."

This should have been predictable. Smartphones, like TVs and PCs, are moving to China, where labor costs are low and production can be scaled for a global market. The fact that Hirai thought branding -- under Google (GOOG) - Get Report (GOOGL) - Get Report Android -- would exempt Sony from that reality was naive. Android offered no "moat," no protection against competitors.

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Only Apple (AAPL) - Get Report , whose iOS is unique and proprietary, is making money in smartphone hardware. Even Google had to eventually sell Motorola. What makes money is software. The software that runs Sony's game machines is unique and proprietary. No one else can make the hardware, all software must be licensed. That's a pretty big moat.

The same is true for Sony's music and film businesses. Both may be under threat from electronic distribution but such products are unique, proprietary, legally protected. They have a moat against competitors.

Last year, Dan Loeb bought 7% of Sony and wrote Hirai a letter, proposing that the entertainment unit be spun out. The letter led to small changes at the unit but not the larger transformation Loeb sought. By this February his Third Point LLC was no longer listed among Sony's largest shareholders.

Loeb's sale should have been a clue to investors that more trouble lay ahead. Now that the phones have hit the iceberg, will Hirai take the assets that are making money and abandon ship, or will he go down with it?

We contacted Sony about this and received no response by press time. What would Morita-san do?

At the time of publication, the author was long AAPL and GOOG, although positions may change at any time.

Follow @danablankenhorn

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates SONY CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SONY CORP (SNE) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins."

You can view the full analysis from the report here: SNE Ratings Report