Sharp and Panasonic hit by a wave of wrong decisions

The collapse in the TV market in Japan and taking business down wrong paths are just a few of the reasons for the demise of Panasonic and Sharp, an analyst has said.

The comments from Bob Raikes, principal analyst at Meko, come as the Japanese companies announced flagging results, falling down in the Japan benchmarks.

Panasonic was hit the worst, falling to the lowest level in 37 years after widening its loss estimate on restructuring costs and falling demand.

It predicted a net loss of $9.5 billion in the year ending March 31, scrapping its May projection of $62 billion profit, it said at the end of the month.

The bulk of Panasonic’s projected loss came from restructuring expenses, which includes writedowns of goodwill on solar cells, lithium-ion batteries and mobile phone operations.

However, according to Mr Bob Raikes, principle analyst at Meko Ltd, one of the most costly moves for the company was that it, along with Sharp, had “put big bets on the energy and solar markets for the future. That seemed like a pretty good plan a few years ago, but we hear that the solar panel market is in
meltdown, with huge restructuring expected,” he said.

“For LCD makers such as Sharp, the similarities between solar panels and
LCDs made the idea of being in both seem both reasonable and prudent. It’s
unfortunate that both markets have dived at the same time,” he added.

He added that  although the companies “had been caught in something of a perfect storm,” Sharp had been hit “particularly hard” by the collapsing local TV market in Japan where it was a brand leader.

Last week the company forecast a record net loss of $5.6 billion for the year ending March 31 as a result of lower demands and competition from Samsung and Sony. It said it would be restructuring the company looking at job cuts.

However, Mr Raikes said there could be more trouble ahead.

“Pretty well all the consumer electronics segments except smartphones and tablets are struggling- and those are really tough categories if you’re not Samsung or Apple,” he said.

“Chinese companies seem likely to be the ‘last standing’ in that segment, from what we see.

“The FT, quoting Capital IQ data, pointed out on Friday that the accumulated losses of Panasonic, Sony and Sharp over the last five years will be around $46 billion by the end of their financial years – equivalent to their profits over the previous 18 years. So, over nearly 25 years, the companies have made no financial progress.

“So, much will depend on the attitude of the investment community, especially to Sharp, which is most exposed,” he added.