The music company — the world’s second-largest after Vivendi unit Universal — will now be called Sony Music Entertainment Inc (SMEI) and become a wholly owned subsidiary of Sony Corporation of America, subject to regulatory approval.

“Even if it becomes a consolidated subsidiary, Sony BMG would make a negligible contribution to (this year’s) operating profits as it has current-year restructuring costs of $140 million,” Goldman Sachs said in a note to clients. “But we see considerable medium-term profit growth potential.” Goldman Sachs maintained its ‘buy’ rating on Sony following the announcement. Some analysts, however, questioned Sony’s move, pointing to declining sales of packaged music.

In 2007, global recorded music sales took an 8% dive to $19.4 billion, according to music industry body IFPI, as CDs were overtaken by digital forms of music distribution. After opening at ¥4,200, Sony shares traded up 3.7% at ¥4,210 by midmorning, outperforming the Tokyo stock market’s electrical machinery index , which gained 2.7%.

Recording artists at SMEI will include Celine Dion, Alicia Keys, Bruce Springsteen, Justin Timberlake, Usher and Jay Chou. (Reuters)