|
| Sony sells LCD venture to Samsung to stanch losses |
| Bloomberg / Tokyo Dec 27, 2011, 00:26 IST |
|
Sony Corp sold its stake in a venture with Samsung Electronics to make liquid-crystal displays to the South Korean company after predicting an eighth consecutive year of losses from televisions, amid sluggish demand.
Samsung will pay Korean 1.08 trillion won ($935 million/ Rs 4,929 crore) in cash for Sony’s stake in S-LCD Corp, a venture formed in 2004, the Suwon, South Korea-based company said in a statement today.
Sony, which invested 1.65 trillion won in the venture, will take a charge of about 66 billion yen ($846 million in the quarter ending December 31 after the deal, Japan’s biggest consumer- electronics exporter said in its statement.
| EASE BURDEN |
| * Venture with Samsung to end, Sony seeks cheaper LCD source |
| * Sony looks to reduce huge losses at TV business |
| * Samsung will pay 1.08 trillion won (Rs 4,929 crore) for Sony's near-50% stake |
The stake sale enables Sony Chief Executive Officer Howard Stringer, 69, to shed the responsibility of panel manufacturing amid losses in the TV business, where Samsung is the world’s biggest.
To turn around Sony, which has forecast a fourth consecutive annual loss this year, Stringer has announced $8.4 billion of acquisitions in 2011 to bolster the profitable phones and music divisions and introduced tablet computers to challenge Apple Inc’s iPad.
“It’s a step forward for Sony,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc in Tokyo. “Canceling the venture enables Sony to become more flexible in procuring panels. Still, Sony continues to face falling prices and heavy fixed costs.”
Sony shares gained 1.6 per cent to 1,394 yen at the close of trading in Tokyo today, while Samsung fell 0.2 per cent to 1.07 million won. The deal was announced after the stock market closed for trading. The Nikkei reported the news earlier today. The maker of Walkman music players and PlayStation consoles has declined 52 per cent this year, valuing the company at $18 billion, down from more than $100 billion in September 2000.
Samsung has risen 12 per cent in Seoul this year and Apple has jumped 25 per cent.
Samsung had 50 per cent of the venture plus one share, while Sony held the remainder, according to the statement. The two companies have also entered into an agreement for supply and purchase of LCD panels, Samsung said in the statement.
The transaction and the subsequent agreement will enable Sony to secure a flexible and steady supply of LCD panels from Samsung, based on market prices, and without the responsibility and costs of operating a manufacturing facility, Japan’s biggest consumer-electronics exporter said in its statement. “Despite this one-time loss, Sony estimates that the transaction will result in substantial savings,” starting January, Sony said in the statement.
Earlier this month, Fitch Ratings downgraded Sony’s long- term ratings to “BBB-,” one level above junk, from “BBB,” citing difficulties in reviving the money-losing TV business and deals that won’t improve profit.
Sony, the world’s no. 3 TV maker, is streamlining its main TV operation, which is estimated to lose 175 billion yen in the year to March. Last month, Sony predicted it will post a loss in the year to March 31 after the company slashed its TV sales target and the yen reached a postwar high.
The Japanese company lagged behind Samsung and Seoul-based LG Electronics Inc. in the global TV market last year, with 12 per cent of sales, according to DisplaySearch. In the US, Samsung and Vizio, founded in 2002, had the biggest share for flat-panel televisions, based on research from IHS iSuppli. Last March, Sony agreed to sell 90 per cent of a TV factory in Nitra, Slovakia, to Hon Hai Precision Industry Co, after disposing of 90 per cent of its largest North American TV-making site to Taipei-based Hon Hai.
Sony also agreed to sell a TV facility in Barcelona in September.
‘Unflagging Resolve’
Earlier this year, Sony agreed to divest its money-losing smaller-sized LCD business to a government-backed fund, which also bought a similar unit from Toshiba Corp. and Hitachi Ltd. expenses at its marketing units.
“I have unflagging resolve” to turn the TV business around, Executive Deputy President Kazuo Hirai said November 2. Sony’s management “feels a sense of crisis” about the unit’s losses, he said.
TV makers also face what Credit Suisse called a “generational culture shift surrounding video consumption.” Teens live in an Internet-based video culture that doesn’t depend on cable and satellite broadcasts, and they are satisfied with “small-screen experiences” and lower picture quality, the analysts led by New York-based Stefan Anninger said in the November 28 report.
For Samsung, finding another buyer for Sony’s stake would have been “difficult,” said Jeff Kang, an analyst at Daishin Securities Co. Separately, Samsung today said it will merge with Samsung LED on April 1.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
