Sony Corp's top investor Daniel Loeb will miss its shareholder meeting on Thursday and those attending will not be considering his proposal to partially spin off the lucrative entertainment business, sources familiar with the matter said.
But his suggestion, which strikes at the heart of whether Sony remains both a consumer electronics maker and a provider of music, movies and TV programmes, will be the elephant in the room at the annual gathering - and for months to come.
Loeb, who heads New York-based hedge fund Third Point, wants Sony to spin off as much as one-fifth of the electronics empire's profitable entertainment unit and use the proceeds to strengthen its struggling hardware division.
The sources gave no reason why he would miss the annual meeting. But he is expected to continue pressing his case with Sony's board and, if no action is taken, will have the right as a major shareholder to eventually call an extraordinary shareholders' meeting.
Sony's strategy to merge content and hardware in a unified company, which kicked off 24 years ago with the purchase of Columbia Pictures, has failed to deliver the synergies it promised, Loeb argued this week in his second letter addressed to Sony CEO Kazuo Hirai.
Loeb's call to awaken Sony's "sleeping giant" - an entertainment business that generates 37 percent of its operating profit with popular artists such as Beyonce and hit franchises like "Spider Man" - may be compelling for shareholders but the company board is unlikely to reach a decision quickly, analysts have said.
With his proposal, Loeb is trying to repeat his success last year at Yahoo Inc, which he took on in a lengthy and eventually bitter proxy fight that triggered a boardroom shakeout.
Tokyo-based Sony, with a market capitalisation of $21 billion, has long been a pillar of Japan Inc and a pioneer in the electronics industry. But it has lost market share - and its innovative edge - to aggressive rivals such as South Korea's Samsung Electronics Co Ltd and Apple Inc as they churn out blockbuster products.
Highlighting the challenge to reviving consumer electronics as a profit centre, Sony in May scaled down its sales targets for digital cameras and PCs for the year to end-March 2015 and chopped the operating profit margin goal for the PlayStation game business for that year to 2 percent from 8 percent.
"Fundamentally, the problem is what to do with the electronics division," said Mitsushige Akino, chief fund manager for Ichiyoshi Investment Management in Tokyo.
"If they don't strengthen that, there's no point. So the hedge fund's suggestion is one way to do that." Adding pressure on Sony to consider his proposals, Loeb's $13 billion fund said this week it increased its stake in Sony to 70 million shares, or about 7 percent.
With Third Point's suggestions off the agenda for Thursday's meeting, shareholders instead will be considering relatively non-controversial management changes including former Sony CEO Howard Stringer's retirement from the largely ceremonial post of chairman of the board.
Annual shareholders' meetings in Japan are typically dominated by questions from individual investors, often airing grievances about company management but rarely leading to changes in management policy or strategy.
It is still unclear how much support Loeb's plan might win among major Sony shareholders. So far, none has come out either in favour or opposed.
Sony shares are up more than 7 percent since Loeb sent his first letter to Hirai with his proposals on May 14. They surged to a two-year high of 2,300 yen in the week that followed the proposals, boosted by a media report that said Sony was considering them.