By Makiko Yamazaki
TOKYO (Reuters) - Japan's Sony Corp said CEO Kazuo Hirai would be handing over the reins to finance chief Kenichiro Yoshida, while it also hiked its annual profit forecast further to a record that highlights the revival in fortune they have both engineered.
The change in helm, while a major surprise, is expected to go down well with investors who have been pleased with Yoshida's no-nonsense approach to restructuring after he became CFO in 2014.
Once a market leader in consumer electronics, the maker of the Walkman and Trinitron TV fell behind the likes of Apple in innovation after the release of the iPod in 2001 and then the iPhone in 2007. It then also lost out to more nimble Asian rivals in price competition.
Hirai and Yoshida together streamlined Sony's unprofitable electronics businesses and then capitalised on the spread of smartphones with image sensors.
People familiar with the 58-year old Yoshida describe him as a reserved foil to the more flamboyant "Kaz" Hirai, but also a forceful partner who pushed through many controversial changes, including the sale of its Vaio PC division and spinning off its TV business.
Vindicating those measures, Sony quadrupled its profits to mark its best-ever third quarter, helped by robust demand for image sensors as smartphone makers increasingly adopt dual-lens rear cameras, as well as strong sales of gaming software for the PlayStation 4 console.
That prompted the 72-year old company to lift its annual operating profit to 720 billion yen ($6.6 billion) for the year through March, versus a prior forecast of 630 billion yen that would have also been a record high.
Yoshida's next challenge is to make sure Sony keeps up this momentum even after the impact of restructuring and demand for image sensors wear off, analysts said.
"The part where he's still not tested, and we really have to see, is whether or not he can inspire the creative aspect of Sony," said Macquarie's Damian Thong.
"There's a need to inspire a new generation of engineers who are meant to take Sony technology and Sony know-how to create breakthrough products in new markets, and this is the crucial test that he faces," Thong added.
Yoshida told a news conference Sony needed to become more competitive globally as it is now dwarfed by rival tech companies in terms of market value. The Japanese firm is worth some $63 billion - less than a tenth of Apple's market capitalisation.
"Market value is not everything but if we do use this yardstick, then the world's biggest companies are all technology companies...As Sony is a tech company, I do feel a sense of urgency about this," he said.
Known for imposing discipline and getting the job done, Yoshida had rattled some parts of the company, including its Hollywood studio business.
Leaked emails from a hack at Sony Pictures show the then CEO of Sony Entertainment, Michael Lynton, confiding to studio co-chair Amy Pascal that he was under "enormous pressure" after Yoshida sought a review of executives' pay.
Yoshida will be taking on the top job at Sony on April 1, replacing Hirai who has been CEO since 2012. Hirai, 57, will stay on as chairman.
Sony's stock rose nearly 2 percent on Friday while the broader market was down about a percent.
(Reporting by Makiko Yamazaki and Minami Funakoshi; Writing by Ritsuko Ando; Editing by Himani Sarkar and Edwina Gibbs)