Competition from Apple and other hardware makers have helped render Sony’s electronics business utterly worthless, says one equity analyst. “Electronics is its Achilles’ heel and, in our view, it is worth zero,” Jeffries analyst Atul Goyal explained in a note to investors last week.

Discussion about Sony's electronics division arose because of recent calls from the hedge fund Third Point for Sony to separate its profitable divisions from its struggling electronics division. Third Point wants to create greater value by detaching the entertainment division from the rest of the company. It believes Sony's electronics division would benefit from the capital raised by a spinoff of the entertainment division and the ability to re-focus on delivering profitable consumer electronics products.

Third Point calls the entertainment division, which includes Sony Music Entertainment and Sony/ATV Music Publishing, a "hidden gem" that is being pulled down by the electronics division. Sony's entertainment companies have generated $7 billion in operating profit over the last decade, according to the New York Times.
 
Sony has done worst with its most consumer-facing electronics products. In the fiscal year ended March 31, revenue at Sony's Mobile Products & Communications division rose 103%. But revenue at the Game and Home Entertainment & Sound divisions fell 12% and 23%, respectively. The lone operating profit of the three was the $18 million posted by the Game division. The Devices division, which includes semiconductors and components, posted a $467 million operating profit on a 17% decline in revenue.
 
In contrast, Sony's entertainment divisions fared well last year. Music posted operating profit of $396 million on flat revenues. Pictures had $509 million of operating profit on an 11% gain in revenue.
 
Sony has stated that its entertainment division is not for sale. But the company's CEO has also stated it will review Loeb's proposal with the board. Investors, sensing the possibility they may have priority access to ownership in a standalone Sony Entertainment, have pushed Sony shares up nearly 11% in the two weeks since Loeb's letter to Sony was made public. 

But could Sony’s electronics division succeed as a standalone company? It's far removed from the days of the Walkman. It has popular devices such as the PlayStation, but loses money on most of them. Whatever synergies the company hoped to get from its electronics and entertainment divisions don’t appear to have materialized. The best path may be addition by subtraction. Goyal believes Sony “needs to exit most [electronic] markets.”

Sony actually makes most of its profit from its financial division. As the New York Times notes, the company’s insurance policies accounted for 63% of operating profit last year. Life insurance alone has generated over $9 billion in operating profit in the last decade.