COMPANY TOWN : Sony Learns to Schmooze Wall Street

With a select few entertainment companies poised to take over the universe, Wall Street and Hollywood seem convinced that Sony Corp. is in a defensive position and will reverse its corporate strategy of maintaining controlling interest in its U.S. entertainment holdings.

There have been heated rumors of a possible sale. In recent weeks it’s been speculated that investment banker Herb Allen, along with Ron Perelman and Terry Semel, may be making a play for all or part of Sony Pictures Entertainment. NBC owner General Electric Co.’s name has also resurfaced as a potential suitor.

But top officials at Sony and other knowledgeable sources insist that despite the rumors and the major quakes on Hollywood’s mega-merger Richter scale, Sony is not interested in selling any part of the company--at least for the moment.

Rather, as one Sony executive put it, the company’s Japanese parent is “a long-term player. They want to realize the value of their investment. . . . It’s a bad time to sell, not a good time.”

Another Sony source suggested that the company is “too close to the debacle of the past to do something like selling the company quite yet.”

Ten months after Sony announced a staggering $2.7-billion write-off on Sony Pictures Entertainment--the parent company of Columbia Pictures and TriStar Pictures--plus another $510-million operating loss on the studio, senior management has put the unit back on track.

Last month, Sony announced that its entertainment group had logged its second consecutive profitable quarter since last year’s write-down. Operating income for entertainment, which includes films, TV and music, jumped 127%, to $115.7 million for the quarter, over the same period a year earlier. The rise was attributed to the success of such movies as “Bad Boys” (more than $45 million in profits to date), “Legends of the Fall” (more than $60 million) and “Little Women” ($35 million) and the strength of television shows like “Ricki Lake.”

Sony sources are also projecting substantial increases in profitability for the next two quarters, based on carry-over international business on movies, the upcoming slate, and continued strength in the TV operation.

The goal now is to sustain profitability with another year of positive earnings under its belt, which would open a whole range of options, including a public offering and taking a strategic partner to make some major acquisitions, most likely a network. (One Sony insider suggests that the paradigm might be the investment US West Communications Inc. made in Time Warner Inc. for a 25.5% stake in its cable operations, HBO and Warner Bros. studio.) That would position the company for a highly competitive future controlled by fully integrated giants.

Alan J. Levine, president of Sony Pictures Entertainment, took the reins of the unit a year ago next week when Chairman Peter Guber resigned, and says he “couldn’t have wished for better results” over the the past 12 months.

“We refocused on what it was we had to do,” Levine said in an interview. “We immediately started making more movies [11 pictures were set in six months] and focusing on our revenue streams and profitability, and redeploying our capital in the company.”

Frustrated about his side of the business being misunderstood by Wall Street, Levine visited financial analysts in New York last week to argue that his division is in much better shape than perceived. He met with four analysts: John Tinker of Furman Selz, Chris Dixon of Paine Webber, David Londoner of Schroeder Wertheim and Dennis McAlpine of Joseph Thal Lyon & Ross.

The company has not had close contact with Wall Street in the past because Sony is Tokyo-based and its stock is not traded on the New York Stock Exchange other than to sell investors American Depositary Receipts, as is the case with many foreign companies.

“I’ve seen analyst reports that don’t even include us or are off-base, so I realized that they are one constituency we must continue to address, so that all of our efforts and results are understood,” Levine said.

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Schmoozing Wall street will also serve Sony well if it does eventually decide to make a public offering over the next 18 to 24 months. Levine used actual profit margins to show analysts how the movie division has turned around, and talked about how the company has accelerated its strategy in TV (with 26 shows on the air, including nine new network series). He also described the company’s aggressive efforts to cut overhead across the board by 10%, resulting primarily from last year’s consolidation of Columbia and TriStar television and, on the film side, of production, marketing and distribution.

“I challenged everyone to reinvent the way they were doing business from a revenue and cost point of view as a way to precipitate a turnaround in the results,” Levine said.

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Levine said another major area of concentration is “redeployment of our capital--using it more strategically.” That strategy entails global distribution with a number of future investments in electronic distribution platforms and channels. Recent ventures in this area include Sony’s partnership with Time Warner, PolyGram and EMI in the music channel; Viva in Germany, and its partnership with Time Warner in the cable delivery system HBO Ole in Latin America.

On the domestic side, Levine said, “we’ll continue to exploit opportunities and other ways to sustain access for our programming.” Sony executives are concerned that corporate mergers--in particular the Walt Disney Co.-Capital Cities/ABC Inc. alliance--could freeze unaffiliated program suppliers like Sony out of the market.

“We’re concerned in the long run about how the change of ownership of more than one network might affect selling in this marketplace,” he said. Since it is a foreign company, Sony cannot own more than a 25% interest in a broadcast station. However, it could benefit greatly from being a strategic partner in a network at or below the 25% limit.

On the theatrical side, Levine praised motion picture group Chairman Mark Canton and his minions for making movies within the company’s new blueprint, which means more “reasonably priced” titles among the higher-budgeted, star-driven “tent-pole movies.”

Levine said the company will continue to put out more than 30 movies a year (there will be 35 in 1995) and will not stop making big-event movies. Next year’s slate includes such films as “Cable Guy,” starring Jim Carrey; “Zorro,” starring Antonio Banderas and directed by Robert Rodriguez; Paul Verhoeven’s “Starship Troopers,” and “Devil’s Own,” teaming Harrison Ford and Brad Pitt.

Times staff writer Sallie Hofmeister contributed to this report.