TOKYO -- Third Point's latest quarterly letter touches on a side of Sony that many Japanese have probably never heard of.
The U.S. hedge fund, known for its activist streak, made headlines last year by calling on the conglomerate to list a minority stake in its entertainment business.
Daniel Loeb, the fund's chief executive, became one of the first foreign investors to bet that Japanese Prime Minister Shinzo Abe's campaign to beat deflation and revive the economy would succeed.
In its letter to investors for the October-December quarter, Third Point continues to sound bullish on Japan.
"Gains will be driven by (Bank of Japan) policies and potentially by Japanese citizens investing in the markets in anticipation of inflation," the firm writes while noting that the April 1 consumption tax hike could prove a roadblock to these scenarios.
On Sony, one gets the impression that Third Point has written off the consumer electronics business as worthless and is focusing instead on entertainment, which it sees as having the potential to do far more than offset the gadget-making side's losses.
The letter mentions "progress" at Vevo, a music video website that few stock analysts or fund managers in Japan seem to know about, let alone ordinary Japanese. This is probably because the service is available in the U.S. and Europe but not Japan.
Vevo is run as a joint venture of Sony Music Entertainment, Universal Music, Google and the state-owned Abu Dhabi Media Co. It streams music videos on its own site and on YouTube. The idea is to earn advertising revenue while protecting the copyrights of Sony and other record labels.
Vevo ranked fourth in videos watched by viewers last December, after Google, Facebook and AOL, according to comScore. It formed a partnership with Yahoo! in March 2012, and Loeb may have gotten a sense of its value while plying his activist trade at the Internet company.
A Sony regulatory filing for the October-December quarter does not list Third Point among its top 10 shareholders. In the previous quarter, the fund had ranked fifth, with a 1.64% stake. At face value, this means that it has sold off a big chunk of its holdings after failing to bring about the entertainment spinoff. But given the letter's plug for Vevo, there may be more to the story.