Sony and Panasonic Lose Nearly $5 Billion, Industry in Decline

We all knew that the consumer electronics market was going to take a hit with the slumping world economy. What we didn't expect was that Sony and Panasonic would lose nearly $5 billion dollars during the 2008 fiscal year! With Pioneer, Hitachi, and Toshiba all posting declines, things don't look good for the consumer electronics sector. All camps reported sluggish sales especially of displays except for Sony which reported a slight increase in their Bravia line. This may indicate that Sony's name brand is capturing the interest of the few consumers that are looking for a new display.

Sony is looking to cut costs and staff. They plan to shut down three manufacturing plants in Japan (which presumably cost more than other locations), reducing the number of plants from 57 to 49 worldwide. This would eliminate 8,000 jobs by year's end, mostly through forced retirement according to Sony. Sony says that they are not anticipating any turnaround of the economy in the next year and projects more losses for 2009.

Panasonic has a more positive outlook. According to the company Panasonic “expects to encounter severe conditions because two trends are developing simultaneously. One is the world recession and shrinking demand, and the other is the changes in market structure such as expanding emerging markets and a demand shift to lower-priced products. Under these environments, the company will rebuild its management structure thoroughly, as well as make preparations for the next phase of development and growth simultaneously, aiming to be in a strong position when the market recovers.” This is most likely code for "Help! We're dieing over here!"

Pioneer is also predicting a slow turnaround like Sony with losses to continue through 2011. Unlike Sony, they are planning some major restructuring including dropping out of the display market altogether. New displays with the Pioneer name on them after 2010 will be made by Sharp. Pioneer will focus within the home audio market on A/V products (presumably receivers and Blu-ray players), DJ equipment, and cable TV set-top boxes. Layoffs of around 5,800 regular employees and about 4,000 temporary and contract employees are also on the horizon.

Hitachi blames it's financial woes on a current restructuring effort which may, in the long run, put them ahead of the curve. They've already spent 150 billion yen and plan on spending more in the next year. Reports have them seeming to focus more on China and other Asian markets rather than trying to vie for the hotly contested western markets.

Toshiba is the only one that is really predicting a quick turnaround. They are suggesting that their consolidated sales for 2009 will increase. This will lead to an overall reduced loss for the company. In its digital products business, while Toshiba is predicting a 1% drop in sales, it is forecasting a return to profitability. This may indicate that Toshiba's exposure in the faster declining markets (like displays) may be minimized due to other aspects of their business being able to offset the losses better. Or they could just be hoping. We'll see. We do know that heir latest line of displays was far from impressive so any help they can get from other business areas is sure to help.

No matter how you read the news, it doesn't look good for businesses. While consumers may enjoy reduced prices as companies try to offload stock, in the long run they are likely to suffer. Competition spurs innovation and as quality manufacturers like Pioneer (whose Kuro line of plasmas have been oft quoted as some of the best on the market) leave, overall quality of the offerings is likely to decrease.