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Japan-Update

Sony CEO Hirai to be replaced by brain behind the curtain

Kenichiro Yoshida will look to build on the company's record earnings

Sony CEO Kazuo Hirai, left, and Kenichiro Yoshida, the company's chief financial officer, speak to reporters in Tokyo on Feb. 2. (Photo by Ken Kobayashi)

TOKYO -- A Sony executive long seen as a prime candidate for the top job is finally getting his shot.

The electronics maker on Friday announced it will appoint Chief Financial Officer Kenichiro Yoshida as its next chief executive. Yoshida, 58, who has been doubling as executive deputy president, is to assume his new position on April 1. Current CEO Kazuo Hirai, 57, will become a nonexecutive chairman, while the CFO position will be filled by current Chief Strategy Officer Hiroki Totoki, 53.

The leadership change comes as Sony transitions from a restructuring phase into a full-on growth drive. Hirai replaced Howard Stringer as CEO in 2012, after four straight years of net losses. For the fiscal year through March, the company is projecting a record operating profit.

"I am happy that I can pass the baton to Yoshida as we are about to end the fiscal year with a better-than-expected performance," Hirai told reporters on Friday afternoon. "I had to make some tough decisions during my time, but the biggest moment of joy was when people told me that lively, energetic Sony is back."

Hirai smiled.

While the out-going CEO is known for his outspokenness and love for the camera, Yoshida is soft-spoken and known for his humble personality.

He chose his words carefully during Friday's news conference.

"The global market environment has changed drastically since 1997, when earnings were last at a high," Yoshida said. "Back then, companies with the largest market capitalization in the world were mainly in resources. Today, they are all tech players. We still have a lot of work to do."

Despite the differences in personality, the two seem to share the same vision. "Yoshida has been my partner for almost four years," Hirai said. "We have led the transformation of Sony together."

Added Yoshida, "There may be differences in our management styles, but we have the same opinions on Sony's future directions."

Indeed, Yoshida has been Hirai's right-hand man and a crucial tactician along the way.

Yoshida joined Sony in 1983 and worked mainly in the finance department. He moved to a subsidiary, internet provider So-net, in 2000, rising to president and representative director in 2005. He spearheaded the company's public listing.

He is also credited with leading Sony's strategic investments, including its acquisition of a stake in Japanese internet company DeNA.

He is often described as cool and a pragmatic decision-maker. Armed with ample experience in the venture capital game, not to mention the fierce competition of the internet industry, he has been on the CEO shortlist for years.

In 2008, when Stringer was still CEO, he attended a party organized by So-net and spoke with a Nikkei reporter. Stringer said Yoshida, who was leading So-net at the time, would make an ideal future boss for Sony.

"We should call him back," Stringer said.

But as Sony slumped -- as it struggled against the likes of Apple -- Yoshida was perceived as a holdover from the old regime.

From 1998 to 2000, he had been the general manager of the CEO strategy office under Stringer's predecessor, Nobuyuki Idei. After Stringer took control, a number of executives and managers who had worked under Idei left. Yoshida, perceived as an Idei ally, was kept at arm's length despite his track record.

That changed in 2013, when Hirai called on him to help revitalize the company.

Earlier, that summer, Hirai had broached the subject of discontinuing VAIO, Sony's ailing PC brand. Other executives wanted to keep the brand alive, but Yoshida disagreed when Hirai spoke with him in private.

"The PC market has changed drastically with the emergence of tablets and other products," Yoshida advised. "We should exit the business."

Hirai brought Yoshida back from So-net to serve as Sony's chief strategy officer in 2013. The following February, the CEO made the call to sell the PC operations.

Yoshida was also behind a move to cut 5,000 jobs and run the TV business as a separate entity. After he became CFO in April 2014, he continued to be the brain behind the curtain for Hirai, who oversaw structural changes and shifted Sony's focus from competing on high-end electronics to selling larger volumes of more affordable products, including TVs and smartphones.

On Friday, Yoshida reflected on his return to Sony as one of his career's memorable moments. "I decided to return because I resonated with Hirai-san's strong will to tackle the problems at hand instead of putting them off," he said.

Today, Sony is the world's top supplier of semiconductor image sensors. This business is generating healthy earnings, as is the game segment, which includes the popular PlayStation 4 console. Music and animation are also bringing in stable profits, while the once-struggling TV and smartphone businesses have improved.

In the new Yoshida era, Sony is expected to continue on the path Hirai forged over the last six years. Yoshida has been working closely with Totoki on growth strategies, including a new midterm plan that will be executed starting this year.

Along with the changes in management positions, Sony on Friday announced its results for the nine months through December.

Revenue for the April-December period was up 15.7% on the year at 6.59 trillion yen ($60 billion), while net profit surged 507 billion yen on U.S. tax-related benefits, bumper sales of image sensors and a strong entertainment segments. Operating profit increased more than 3.5 times on the year to 712 billion yen.

Friday, though, was a day to look ahead. "I'm concerned that our staff and management team will let their guards down too much because of the record performance expected this fiscal year," Hirai said.

Added Yoshida, "Our balance sheet needs to be improved further, and we need to make sure we continue with the high level of earnings in coming years."

Sony shares edged higher on Friday in Tokyo. The stock finished the day at 5,485 yen, up 1.86% from Thursday.

Nikkei Asian Review Homepage Editor Nobuyuki Okada contributed to this report.

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