Sony, Sharp post combined $11 billion loss as TV units bleed

TV Shipments Fall

Global TV shipments last year fell for the first time in six years because of excessive inventory in the U.S. and Europe, and the end of Japanese government subsidies for purchases, according to DisplaySearch, part of NPD Group. Shipments fell 0.3% to 247.7 million units, the researcher said.

Samsung and South Korean competitor LG Electronics Inc. both increased their share of the global flat panel TV market in the fourth quarter while Sony, Panasonic Corp. and Sharp all posted a decline, according to DisplaySearch.

Suwon, South Korea-based Samsung last week reported a record first-quarter operating profit of 5.8 trillion won ($5.1 billion) on gains from selling phones and TVs.

“It’s only been two months since Sony cut forecasts last time,” said Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc. in Tokyo “Given the general trend that orders and sales improved this past quarter, it’s unclear what could have changed so dramatically. Overall, the impression of today’s announcement is very bad.”

Hirai is scheduled to outline his turnaround plan on April 12. Sony, worth more than $125 billion in 2000, is now valued at $20 billion, compared with $591 billion for Cupertino, California-based Apple and $170 billion for Samsung.

Hirai’s Team

The new CEO, who’s been credited with making the PlayStation game business profitable, is bringing in a new team and has put himself in charge of Sony’s TV business, which is forecast to lose money for an eighth consecutive year.

Hirai has already taken action in an effort to boost the TV business. Last year, Sony exited a panel-making venture with Samsung, saying the sale of that stake to the South Korean company will save about 50 billion yen in costs for Sony’s TV operation.

Sharp also posted the worst loss since the company was founded a century ago. The company has cut production of TV panels at its two biggest LCD plants as demand has failed to meet supply. The company’s so-called 10th-generation factory in Sakai, has a production capacity of 72,000 panels a month, while the eighth-generation LCD plant in Kameyama, Mie, is capable of making 100,000 panels.

“Our previous forecast was too optimistic,” Tetsuo Onishi, an executive managing officer said in a press conference in Osaka. “Sales are still bad.”

Foxconn

Last month, the company turned to Foxconn for help. The Foxconn group, including Taipei-listed flagship Hon Hai Precision Industry Co., will buy 9.9% of Sharp for 66.9 billion yen in a new-share sale. Foxconn Chairman Gou and related investment companies will buy 46.5% of Sharp Display Products Corp., a venture with Sony Corp., for 66 billion yen.

The deal, the largest Japanese investment by a Taiwanese buyer, includes an agreement to purchase as much as 50% of Sharp Display’s LCD panels.

Standard & Poor’s cut Sony’s credit rating one level in February to BBB+, S&P’s third-lowest investment grade, because of falling prices, waning demand and tougher competition. The announcement followed downgrades by Moody’s and Fitch Ratings, which cited difficulty in turning around the unprofitable TV business.

The cost of insuring Sony’s debt against default rose 9 basis points to 199 basis points as of 5:16 p.m. in Tokyo, according to data provider CMA. That’s the highest level since March 23, CMA prices in Tokyo show.

Bloomberg News


 

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