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Last week, hedge fund Third Point announced its push to Sony (NYSE:SNE) for a spin-off of the company's entertainment division and the possible sale of other assets. This announcement comes as Sony stock has been trading up 77% in 2013. Despite the rally, shares are still down 58% over the last five years and appear to need a change. Is Third Point's plan the one that can keep Sony going?

Third Point founder Daniel Loeb wants to spin-off the entertainment segment, which contains Sony's movie assets and music assets. This is the same Daniel Loeb guy who brought about changes at Yahoo (NASDAQ:YHOO) by bringing to light the CEO's lies about his education. Loeb also helped land Marissa Mayer at Yahoo after convincing her to depart from Google (NASDAQ:GOOG).

As a sign of respect and to get the ball rolling, Loeb hand delivered his letter to executives in Japan. Loeb also met with Sony executives while in the country. Loeb argues that spinning off the entertainment segment would boost profit margins on hardware and software made by Sony. Loeb also thinks that the move could boost Sony's share price by as much as 60%. Under Loeb's plan, 15-20% of the new entertainment company would be handed to existing shareholders. Loeb is willing to backstop the $2 billion IPO for Sony entertainment.

In the last fiscal year, the company posted net revenue of 6.80 billion yen. The movie segment loss 17.3% to 848.6 million yen. Music revenue came in at 441.7 million yen, a decline of 0.2% from the previous year. These two segments made up 19% of Sony's total annual sales.

The movies segment includes the popular Sony Pictures and Columbia Pictures segments. The studios have movies like "This is the End" and "After Earth" hitting theaters this summer. The segment also is responsible for the "Zombieland" original series that will air on Amazon (NASDAQ:AMZN). Breaking Bad, which is part of Sony, is making its foreign original series debut in Latin America. Sony will also be launching getTV in the fall of 2013. This digital channel will air classic movies, including many owned by Sony.

On the other side, Sony Music consists of strong brands like Columbia, RCA, and Epic. Sony is also part of the joint venture Syco, with longtime American Idol and X Factor personality Simon Cowell. The extensive catalog of songs owned by Sony sets the company up well for royalties from digital downloads and music stations like Spotify and Pandora (NYSE:P). Here is a partial list of songs owned by Sony:

· "New York, New York", "All You Need is Love", "Moon River", "Jailhouse Rock", "Mission Impossible Theme", "Stand by Me", "Over the Rainbow", Singin' in the Rain"

Sony also has deals with several of the bestselling artists today and will continue to benefit from their popularity. This list includes:

· Beyonce, Jay-Z, Lady Antebellum, Lady Gaga, Taylor Swift, and Kanye West

Sony chief executive officer Kazuo Hirai will show investors a turnaround presentation next week. Hirai will show growth plans for Sony. The CEO will likely discuss reasons why the company should stay together as one, as it appears executives are currently against Third Point's suggestions. Shares could be under pressure during this presentation, as investors will want to see what is up Sony's sleeve if no spin-off happens.

The big negative holding back the split is the placing of the Playstation and gaming segment. Investors could view the segment as entertainment and hardware. Sony executives have already used this as a reason to not split up the company. Of course, the launch of the Playstation 4 this year could also put a wrench in plans to change the company's current operating structure, as it is in for a big year.

Shares of Sony were up 10% on the heels of Loeb's letter announcement. When looking at recent related spin-offs, I think the option is there for Sony. Cablevision (NYSE:CVC) spun off AMC Networks (NASDAQ:AMCX) in June of 2011. Since that time, shares of AMC are up over 80% as investors poured into the popular cable television network. Liberty Media also spun off Starz Channel (NASDAQ:STRZA) in a recent deal.

By spinning off the entertainment segment, Sony will have to put its full attention into hardware once again. This underperforming segment needs to step up and help Sony regain the market dominance it once had. If a spin-off does not happen, Sony will continue to hide its losses in this segment behind the strong performance of movies, music, and television.

Shares of Sony are up on the year, but still have room to run. The company has lost over $100 billion in market capitalization from its peak. With a possible spin-off and the Playstation 4 launch, it's time to get behind Sony shares.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SNE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.