Tokyo: Sony Corp shareholders pressed the corporation’s chief executive on Thursday for a response to a proposal by hedge fund Third Point to spin off its profitable entertainment business, aiming to invigorate its struggling electronics division.

Sony chief executive officer Kazuo Hirai told an annual shareholders’ meeting that the company would carefully consider the proposal by Daniel Loeb, the billionaire hedge fund manager of Third Point and Sony’s top shareholder.

“Our entertainment division will remain an important part of Sony’s business,” Hirai said. “The board will continue to discuss Third Point’s proposals and we will reach an appropriate decision.”

Loeb 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 hardware division.

His suggestion, likely to stay on the radar for months, strikes at the heart of whether Sony remains both a consumer electronics maker and a provider of music, movies and TV programmes.

At Thursday’s meeting, attended by thousands of shareholders, Hirai said it was important for Sony’s board to thoroughly and carefully consider the proposal and to seek outside input, without rushing for the sake of reaching a decision quickly.

“This is a very big proposal aimed at Sony’s important business,” he said. “I understand this to be a very important proposal that involves what Sony is now and what Sony will be in the future.”

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 Hirai.

Loeb’s call to awaken Sony’s ‘sleeping giant’ — an entertainment business that generates 37 per cent of its operating profit with popular artists such as Beyonce and hit movie franchises like ‘Spider-Man’ — may be compelling for shareholders.

Loeb is expected to keep 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.

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 shake-up.

Tokyo-based Sony, with a market capitalisation of $21 billion (Dh77 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 per cent from 8 per cent.

“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 per cent.

Third Point’s suggestions are not on the agenda for a shareholder vote at 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 per cent 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 ($24.21, Dh88.92) in the week that followed the proposals, boosted by a media report that said Sony was considering them.