Spotlight on Sony Corp. - Japan's New Rising Sun.
By Cindy Christ

In move to make its stock more affordable to individual investors, Sony Corp. (SNE) said Monday it would split its stock 2-for-1 in May.

The world's largest maker of audio and video equipment said the split would take place May 19 for shareholders of record March 31, 2000. After the split, Sony will have 893.1 million shares outstanding.

Sony's last split was in November 1991.

The company also said it will issue 32.98 million new Sony shares to provide voting rights to stockholders of Sony Music Entertainment and Sony Chemicals Corp., which will be absorbed in January through an exchange of stock. The current value of 100 shares in these two affiliates equal less than 100 shares in Sony Corp., preventing investors from voting at shareholder meetings.

Sony currently pays a dividend per share of $0.48. After the split, the company said it would cut the dividend in half to maintain the same percentage yield.

The news comes on the heels of slew of stock splits recently announced by Japanese companies, which before the recession mostly relied on bank loans to finance business dealings. But as credit dried up at ailing Japanese banks, companies have increasingly looked to equity funding as an alternative.

American investors applauded the split announcement, bidding up Sony shares to a new 52-week high. At midday, shares were trading higher $20.38, or 8.8 percent, at $257.38. It later hit a high of $260.

In Tokyo, where the announcement was made after the market close, Sony shares slid 500 yen, or 2 percent, to 24,300, ending a 10-session winning streak.

Driven by investor enthusiasm for the company's efforts to re-make itself into a dominant Internet and wireless player, Sony shares have been on a tear this year, rising 300 percent since January. In the last 12 months the company has moved aggressively to improve its prospects in a digital world by entering a rash of collaborative and strategic partnerships with technology heavy weights, including Sun Microsystems, Palm Computing, Microsoft and IBM, among others.

Last week, Sony Corp. of America took a stake in satellite Internet Broadcaster ibeam Broadcasting, a company that helps networks speed up Internet content and streaming media delivery using caching servers, satellite feeds, traffic -routing software and other technologies.

Analysts say Sony Corp. also is in talks with Nokia (NOK), Ericsson (ERICY) and Motorola (MOT), who all need the consumer electronics giant's device technologies and video capabilities to make Internet access possible over new wireless devices.

"We think that the 'digital convergence' of the telecom, data communications, and broadcasting industries is clearly under way. In our opinion, Sony is well positioned to take advantage of that shift because of its strong position in both content (movies, music, software) and hardware (consumer electronics, game machines, PCs)," said Merrill Lynch, which includes the stock on its Global Focus List for 2000.

Merrill Lynch analysts have an "accumulate" rating on Sony shares and project 2000 earnings per share of $2.49.

Last week, Sony Corp. and Qualcomm (QCOM) announced they would sell their jointly-held cellular phone factory to Japan's Kyocera Corp. in February 2000, a move allowing Sony to exit the North American cell-phone manufacturing business.

Also last week, the European Union gave Columbia House, the music business jointly owned by Sony Corp. of America and Time Warner (TWX), approval to buy a stake in online music retailer CDNow (CDNW).

In July, CDNow entered an agreement with Sony Corp. of America and Time Warner Inc. to merge with Columbia House, the leading club-based direct marketer of music and videos. Sony and Time Warner will each own 37 percent of the new public company resulting from the merger. CDNow's existing stockholders will own the remaining 26 percent. The transaction is expected to be finalized in first quarter 2000.

On Monday CDNow reported that its sales jumped 200 percent over last year in the week following Thanksgiving, reaching three million customers over the holiday shopping season. On both Dec. 4th and Dec. 2nd, CDNow logged more than one million visitors, the company said.

"The holiday season is important for the music industry, and we are seeing both strong demand for our products and great interest in our wide variety of music-related content," said Jason Olim, CDNow president and chief executive, in a statement.

Some market watchers said that investor reaction to Sony's split announcement was overdone, especially with shares up more than threefold this year. Perhaps they failed to notice that the Japanese powerhouse is hitting on three cylinders expected to lead the market higher next year -- e-commerce, digital electronics and wireless Internet.

"The trend toward digitilization of consumer electronics products represents an opportunity for Japanese producers in light of their traditional competitive strength in that area and in related technologies," said Merrill Lynch in its "Collective Wisdom Portfolio Recommendations" for 2000.

"Moreover, the strength of the Japanese in consumer electronics and related technologies offers companies an entry into the high growth internet/telecom markets, especially in the realm of internet 'appliances' and mobile internet-access systems," the report said.

Shares in Sony closed up Monday, $18.19, or 7.7 percent, at $254.69