By Ritsuko Ando
TOKYO (Reuters) - Japan's Sony Corp plans to raise nearly $4 billion via new shares and bonds to plough into image sensors as it reinvents itself as a niche component maker, pulling back from consumer goods like TVs that dragged it into losses.
In Sony's first new share issue in 26 years, the firm said on Tuesday it expects to raise 321 billion yen ($2.62 billion) from a public stock offering after a rally that has seen its market value double in a year. It will raise a further 119 billion yen from a convertible bond issue to fund a boost in sensor output capacity at its advanced plants in Japan.
Worth close to a tenth of its current market value, the share issue provides the clearest signal yet that Chief Executive Kazuo Hirai is prioritising the sensor business to anchor Sony's turnaround. The firm has long been plagued by losses in branded goods like smartphones, hit by fierce competition from both cheaper rivals in Asia and industry giants like Apple Inc (NASDAQ:AAPL) and Samsung Electronics (KS:005930) Co.
The image sensors, a key high-tech component in digital cameras and smartphones, have emerged as one of Sony's strongest lines alongside its PlayStation videogames unit, helping the company recover from a long slide in TV and smartphone sales. Still, Sony is only just emerging from decline, booking a net loss of 126 billion yen in its latest fiscal year, though it expects a profit of 140 billion yen in the current year.
The move caught investors by surprise on Tuesday, with fears the new stock will dilute per-share earnings sending the stock 8.3 percent lower at the close. Yet the company's market value has climbed in step with its recent recovery progress, and has more than doubled since June 2014 to close to $35 billion.
"In addition to securing funds for active and concentrated investment in businesses that are driving growth," the company said in a statement. "Sony ... aims to secure its ability to make future further investment."
Unlike videogames, developing sensors requires a consistently heavy drain on capital expenditure with Sony's balance sheet already stretched as it restructures, selling or splitting off loss-making operations and slashing jobs.
Despite Tuesday's shares drop, Takatoshi Itoshima, chief portfolio manager at Commons Asset Management, said the move was seen as more positive by longer-term investors.
"It's positive that it is investing in the sensor business which is seen promising," he said. "But short-term investors may question the strength of its balance sheet, or wonder whether the company could've slashed more of its businesses before raising money from the market."
Sony had previously flagged smaller-scale commitments to expand in sensors. It said in April that it would spend 45 billion yen to bolster sensor production capacity this fiscal year, on top of a 105 billion yen investment announced in February.
A Sony executive recently told Reuters that demand for sensors was now so strong that it was struggling to keep up.
Tomoyuki Suzuki, head of Sony's device solutions business, which includes image sensors, said earlier this month he expected sensor sales to grow by nearly a quarter to 550 billion yen in the year ending March.
By contrast, the company has forecast sales at its TV business to fall around 6 percent to 1.16 trillion yen. Despite its previous losses from TV operations, Sony has said it's keen to maintain a presence in the business, not least as a means to promote brand awareness among consumers.