Could Sony sell off its entertainment operations in an IPO? That’s what Third Point, Daniel Loeb’s hedge fund, wants to see, according to news reports.

As much 20 percent of the company could be sold in such a deal, according to the Third Point proposal outlined in Loeb’s recent letter to Sony management. “To succeed, Sony must focus,” Loeb argues in the letter.

That would let the remainder of the company concentrate on its well-known electronics business.

But Sony says the entertainment units are not for sale, according to news reports. “The entertainment businesses are important contributors to Sony’s growth and are not for sale,” a statement from Sony read in part.

Third Point is an important investor in Sony – owning $1.1 billion worth of company shares. That represents about 6.5 percent of Sony, according to news reports.

In explaining why Sony may not want to undertake the IPO, Satoshi Yuzaki, a manager at Takagi (News - Alert) Securities, told Bloomberg News that “the entertainment unit has stabilized Sony’s sales and profit.”

Sony’s movie business represents some 26 percent of the company’s operating income during the recent fiscal year, while its music business represented some 20 percent of the company’s income, according to Bloomberg (News - Alert).

Overall, Sony has faced many challenges in recent years. These range from the massive earthquake and tsunami in Japan to competition from rivals and the financial crisis seen worldwide.

Sony shares have dropped close to 85 percent over the last 13 years – due in part to competition from Apple (News - Alert), Samsung and LG, according to news reports. Sony recently said it saw profit in the last year, however. The company also announced last year it was cutting its employee count by 10,000 – as a cost-saving measure – and earlier this year, Sony sold off its United States headquarters in a deal valued at $1.1 billion, TMCnet reported.