NEW YORK -- Sony, Panasonic and Sharp this week outlined their turnaround strategies after posting bleak second quarter financial results with big write-offs. The embattled Japanese companies, however, are scrambling to respond to two simple questions:
1. Is the worst over? 2. What, if anything, will drive their future growth?
The Japanese consumer electronics companies have already made it clear they hope to get out of the money-losing TV business as soon as possible. While they shift their focus from consumer to industrial markets and pitch themselves as developers of “eco” and “smart” products, details remain sketchy and largely unconvincing.
For now, the financial community is not buying their argument and sees little hope in the Japanese electronics companies’ future.
Fitch Ratings, a global ratings agency, downgraded Sharp’s credit to junk on Friday (Nov. 2). “Fitch does not foresee any meaningful operational turnaround in the company’s core business over the short- to medium-term," the company said in a statement.
Similarly, Standards & Poors downgraded Panasonic’s long-term debt to BBB, the second-lowest investment grade, from A-. The ratings company cited “huge” losses and a slow recovery outlook.
Undoubtedly, the strong yen has been hurting Japanese companies. But the real dilemma is that none has been able to tell a convincing story about how they plan to return to profitability.
The trio share some core problems, but each has a different story. With Panasonic, the issue is the future of their so-called “eco” products. Sony continues to struggle with its “refocused” core electronics products. But Sharp may have it worst of all. The company appears to have already damaged a relationship with its biggest customer – Apple, delivering small displays for iPads and iPhones much later than promised.
Panasonic this week announced a new strategy that includes scaling back manufacturing in Japan, ending overseas sales of mobile phones and curbing investment in solar panels and rechargeable batteries.
Drastic changes are needed to stop the bleeding. Of three segments Panasonic has identified as growing businesses – namely solar, lithium-ion batteries and appliances, it is already making further cuts in two of them.
Under the new plan, Panasonic will cut domestic production lines for rechargeable battery cells by half, while focusing on non-consumer applications. It will also curtail investments in a solar panel production factory in Malaysia.
Meanwhile, it will halt sales of smartphones in Europe this year, even though it only reentered the European market in March.
So, Panasonic, which calls itself a “Green Innovation Company,” is finding it much harder to create so-called “Eco & Smart Solutions” as it trims most of its “green” products and smartphones, which could hold a fundamental key to the growth of new smart appliances.
I stopped purchasing anything Sony about 20 years ago when I had a problem with one of their CRT based TVs just out of warranty.
Calls and letters to Sony answered the same way "take it to your local Sony Repair Station(SRS), but it is not under warranty.". Fine, so I asked for schematics of the TV to try and repair it myself and was told Sony only supplied those to the SRS's.
I chunked the TV and swore off anything Sony from that point on. A couple of years later when the Internet was coming ito it's own I found similar comments there as well. Sony just flat stopped lietening and assisting it's customers because they thought their brand name would carry them through thick and thin.
As far as Sharp going to junk bond status I am only happy for one reason, Apple already announced plans to stop dealing with Samsung on their displays (whom is their highest quality/quantity supplier and moving that volume to Sharp. ;)
"Sony’s financial services are generating a better-than-expected profits."
That's the saddest part of the whole article. It seems the way the economy is set up, the biggest rewards are for those who just skim money from it instead of adding value to it. It's a sad system when you reward the leeches and punish the doers.
I agree that the Japanese companies will not exit the TV space willingly. In the case of Sharp it may be forced upon them as they teeter on the verge of bankruptcy as they warned investors last week about their serious doubts of being able to continue as a going concern.
It would appear that they will become overpriced resellers but this strategy will work only if their brand names continue to carry a significant premium in the marketplace.
As for OLED, I agree it won't save their TV business but it will give them the opportunity to lose a few more billion.
You are absolutely right. None of the Japanese CE vendors will totally "exit" from TV business; but they will eventually shift their model from making everything on their own to sourcing TV sets from someone else and slapping their logos on top of them. (Just like what all PC companies in the U.S. do)
I am aware of Sony-Panasonic deal on OLED, but I wouldn't bet on OLED to save either companies' TV business.
Whilst Sony's TV unit losses have averaged over a billion dollars per year over the last 8 years and getting out of the TV business may be an economic necessity, I have not heard of any mention from Hirai that Sony was exiting the TV business. In the past Hirai has stated that the TV was the centrepiece of Sony's home ecosystem, and promised to put the TV unit back into the black by March of 2014. Moreover if Sony planned on exiting the TV business, why would it enter into an OLED partnership with Panasonic in June of this year? On Oct. 2 Hirai stated that “Sony has a very deep DNA in creating the best picture and the best sound.” Doesn’t sound like someone who is about to exit the TV business even though the TV unit is on track to lose another billion dollars this year even after further production cuts of 2 million units per year.
As for shrinking game console and digital camera sales, Sony, along with many others, is falling victim to the overwhelming success of smart-phones and tablet computers in these spaces.
The unemployment rate in Japan is around 5% and it is easy to find low-wage unskilled jobs. Finding a good job, like anywhere else, is difficult, as the large Japanese conglomerates are retrenching and laying people off.
what's the jobless number of Japan now, anyone?
Is japanese folking all switch to fishing now?
If moores law dead in 5-10 years this will be the fate of US ppl, I can smell intel, micron, amd ... follow sharp's footsteps.
"solar is effectively dead without government subsidies"
Wrong. If you eliminate fossil fuel users' right to pollute without compensating the victim, which is a subsidy of over a trillion dollars per year worldwide, then solar would be just fine.
Solar cannot compete if it has no subsidies but its competitors do. But that doesn't tell you very much.
Basic econ says the way to handle pollution is to force polluters to pay. Until they are required to, markets are using the wrong prices and get the wrong result.
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