Tribune (TRBAAA) Buys Gracenote From Sony (SNE) for $170 Million

NEW YORK (TheStreet) -- Sony (SNE) announced Monday it will sell Gracenote to Tribune (TRBAA) for $170 million.

Gracenote is best known as the database that Apple (AAPL) uses to identify music tracks in its iTunes software. In addition to its database of music information, Gracenote offers a service that can identify movies and TV shows by using smartphone and tablet microphones to analyze soundtracks and dialogue.

Tribune, which owns both the Chicago Tribune and Los Angeles Times, will use Gracenote to boost its "core competencies" CEO Peter Ligouri said in the press release. The media company's Tribune Media Services already has a large database of entertainment metadata, which Gracenote will add to.

The deal is expected to close before the end of Sony's fiscal year, which ends on March 31, 2014. The company expects to see a $60 million gain from the sale after writedowns it recorded on the value of Gracenote's assest.

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 largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
  • Net operating cash flow has increased to $1,223.24 million or 28.12% when compared to the same quarter last year. Despite an increase in cash flow, SONY CORP's cash flow growth rate is still lower than the industry average growth rate of 75.11%.
  • SONY CORP has improved earnings per share by 5.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, SONY CORP turned its bottom line around by earning $0.30 versus -$5.52 in the prior year. For the next year, the market is expecting a contraction of 35.0% in earnings ($0.20 versus $0.30).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, SONY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SONY CORP is currently extremely low, coming in at 3.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.07% trails that of the industry average.

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