Sony Corp (ADR) (NYSE:SNE) had a very good year in 2017, with SNE stock rising nearly 62%, as it finally began achieving profit lift-off under CEO Kazuo Hirai.

Hirai has been CEO since 2012, having previously run the company’s video games division after starting in the music unit. This is the year performance under his leadership finally began outpacing the S&P 500.

Hirai has had to transform what had been a consumer electronics company into a content company — and do it within the conservative business culture of Japan. His success has justified the faith of patient investors, and the company’s prospects may now entertain new ones.

This is also the first year Hirai has not faced strong headwinds from a falling Japanese Yen. The currency is up slightly against the dollar for the year. The Sony numbers are, thus, real numbers, not lost in translation.

Entertainment Assets

Sony still makes TVs and mobile phones, but the stars of its show today are its gaming, music, film and TV units. As the deal between The Walt Disney Co. (NYSE:DIS) and Twenty-First Century Fox Inc (NASDAQ:FOX, NASDAQ:FOXA) finally breaks the logjams against deals in the space, Sony can be a player.

Had the logjam been broken a few years ago, Sony would have likely been a seller. As it is, Sony is in position to be either a seller or a buyer. Sony can now bring 5% of revenue to its net income line and, with little debt on its books, it has financial flexibility.

Sony’s Columbia Studios has 8.5% of the 2017 box office so far, thanks to movies like Spider Man and Baby Driver. It has the financial muscle to go after Viacom, Inc. (NASDAQ:VIA, NASDAQ:VIAB), which owns Paramount, and achieve a competitive market share against the Disney-Fox combination.

Sony’s legendary founder, Akio Morita, originally got into content to provide vertical integration with consumer electronics, devices like the old Walkman (ask your dad), but now software is what holds up hardware. The late Morita-san would undoubtedly be pleased to see that the strategy of integrating content with hardware has finally worked, with the Sony Playstation commanding 57% of the console market.

Buy or Sell Sony Stock?

But just as a sale to U.S. interests once looked likely, today, Sony faces the attractive prospect of being acquired by a Chinese company. Its gaming and entertainment assets would look great as part of Tencent Holdings Ltd. (OTCMKTS:TCEHY),which has a market cap of $476 billion, dwarfing Sony’s $58 billion. Sony’s console would be a nice complement to Tencent’s lead in mobile gaming, while the studio assets would be complementary to what Tencent has been building.

Thus, 2018 could be the big-deal year for Sony. The company still has its problems, as Vince Martin notes, but it now has a strong position, as Tom Taulli notes, to address those problems. Josh Enomoto expects more upside surprises. 

My own view has long been that video games are Sony’s ace in the hole, and now may be the right time to play that card, with interest in the sector peaking, but interest in consoles having peaked.

It’s hard to advocate buying primarily in anticipation of a deal, but that’s the best reason to buy Sony shares today. Even if the whole company stays together, it now has the financial muscle to make deals on its own terms.

As a buyer or seller, Sony is going to be an interesting stock to watch in 2018 — and it’s been a long time since one could write that.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.