Japan’s
biggest makers of phones, televisions and chips say they’ll lose about $17
billion this year, about three-quarters of what Samsung Electronics Co. will
spend on research to lengthen the lead over its competitors.
Sony Corp. more than doubled its annual loss
forecast for the year ending March 31 as it announced a new chief executive
officer, while Panasonic Corp. (6752) and Sharp Corp. predicted the worst
losses in their histories. Their combined losses compare with the $22 billion
that Samsung, Asia’s largest consumer- electronics company, said it will invest
in capital expenditures.
Japanese companies hurt by a stronger yen,
flooding that swamped Thailand factories and weaker demand for their TVs may
not be able to regain ground lost to Samsung and Apple Inc. That’s prompting
Sony and Panasonic to focus on sectors including medical devices, solar panels
and rechargeable batteries in an effort to revive earnings.
“Japan’s consumer-electronics makers are in a
total breakdown,” said Masamitsu Ohki, a fund manager at Stats Investment
Management Co., a Tokyo-based hedge fund. “They need to compete with ideas, not
technology.”
Samsung is the world’s biggest maker of TVs,
memory chips and flat-screen panels, and the second-biggest manufacturer of
mobile phones. The Suwon, South Korea-based company and its affiliates plan to
spend 47.8 trillion won ($43 billion) this year on new product research and
upgrading plants.
Harsh
Competition
Samsung, which doesn’t forecast annual
results, reported a 17 percent increase in fourth-quarter net income.
“The Japanese consumer electronics makers
shouldn’t compete with the Koreans in the same market,” said Koji Toda, chief
fund manager at Resona Bank Ltd. in Tokyo. “The environment surrounding
Japanese manufacturers is very harsh.”
Panasonic, Sony and Nikon Corp. gained in
Tokyo trading today as Asia-Pacific markets rose after U.S. jobs data beat
estimates, raising expectations that exports will increase.
Panasonic gained 6.3 percent to 637 yen on the
Tokyo Stock Exchange, and Sony advanced 4 percent to 1,492 yen. Nikon surged 11
percent after raising its full-year operating profit forecast 7.5 percent on
higher-than-expected demand for digital cameras.
The MSCI Asia Pacific Index added 0.4 percent.
Panasonic’s reform of TV and chip operations,
cost cuts, buying more parts from Asian producers and a recovery from flood
damages may boost profit by about 250 billion yen ($3.3 billion) in the year
starting April 1, the company said Feb. 3.
Recovery
Measures
President Fumio Ohtsubo “highlighted bold
recovery measures,” Shiro Mikoshiba, an analyst at Nomura Holdings Inc. in
Tokyo with a “buy” rating on Panasonic shares, said in a report today.
“Panasonic continues to be among electronics makers with prospects of large
profit increases next fiscal year.”
Sony, Japan’s largest electronics exporter,
predicted its loss in the year ending in March will widen to 220 billion yen,
the first time since the Tokyo-based company began trading in 1958 that it will
have four consecutive annual losses.
Kazuo Hirai, named last week to take over as
CEO starting April 1, said he will close less-competitive businesses. Sony,
worth more than $100 billion in 2000, is now valued at about $19 billion.
Moody’s Investors Service said today it
remained “concerned that Sony’s earnings may remain weak and volatile without
effective strategies to deal with the company’s structural challenges.” The
company’s credit profiles remain under “strong pressure,” the ratings company
said.
Strong
Yen, Weak Won
Panasonic, Japan’s biggest appliance maker,
forecast a 780 billion-yen loss, the worst since the Osaka-based company was
founded in 1918.
Fitch Ratings today downgraded Panasonic’s
long-term rating to “BBB-,” the last of its 10 investment grades, from BBB,
citing “material deterioration” in the company’s financial results. Fitch also
had a “negative” outlook on the company.
Sharp, the maker of Aquos TVs, predicted a
loss of 290 billion yen, its worst in a century. Moody’s today changed its
outlook for Sharp’s “A3” rating to negative.
“The rating action reflects Moody’s increasing
concern that Sharp may not be able to improve its financial profile in a timely
manner,” Moody’s said in the statement.
Thailand’s worst floods in 70 years shut
factories making cameras and hard-disk drives, disrupting production and
causing shortages during the holiday shopping season.
Apple’s
Record Profit
Samsung also benefits from the strengthening
Japanese currency against the dollar, compared with the weakening won against
the greenback.
The yen’s 7.3 percent surge against the dollar
and 11 percent gain against the euro in 2011 damped the repatriated value of
Japanese companies’ overseas sales. Sony earned 70 percent of its revenue
outside Japan and Panasonic 48 percent.
Manufacturers have been forced to both
relocate production outside of Japan and to press their suppliers for cost
cuts.
By comparison, the won depreciated 1.3 percent
against the dollar in the past year, helping Samsung, which earned 85 percent
of its revenue in 2010 outside South Korea.
Samsung’s profit in the quarter ended December
advanced 17 percent to 4 trillion won, helped by smartphone sales that kept
pace with Cupertino, California-based Apple. Sales rose 13 percent to 47.3
trillion won.
‘Marvelous
Manufacturer’
“Samsung is a marvelous manufacturer,” said
Edwin Merner, president of Atlantis Investment Research in Tokyo, who manages
$300 million. “They can make good things at a very low price. Sony can’t do
that.”
Apple had a net income of $13.1 billion in the
quarter ended Dec. 31, ranking it among the highest quarterly profits on record
and putting the company in the same league as Exxon Mobil Corp. and Russia’s
Gazprom OAO.
“Apple changed the paradigm of thinking,”
Stats Investment’s Ohki said. “It would be very hard for the Japanese companies
to recover unless they can get back the de facto standard for products like
mobile phones from Apple.”
That’s what Sony wants to do. The company will
strengthen mobile devices and expand in new areas such as medical, Hirai said
Feb. 2.
In the television business, Sony hasn’t had a
profit in the past seven years selling Bravia models, while bigger rivals
Samsung and LG Electronics Inc. are profitable in the sector. Last year, Sony
exited a joint venture with Samsung that makes panels as part of revamping the
business, that’s set for an eighth year of losses in the year to March 31.
Sony’s financial services, music and movies
businesses were all profitable in the year to March 2011, according to data
compiled by Bloomberg.
“We weren’t able to select areas where we want
to concentrate, so we ended up keeping products that became commoditized,”
Hirai said. “We want to make our focus clear soon.”
Mariko Yasu and Naoko Fujimura
Bloomberg
Business & Investment Opportunities
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