Panasonic Redirects Its Energy
TOKYO—Signifying a shift in strategy away from consumer electronics, Panasonic Corp. announced plans to invest more on rechargeable batteries, solar panels and other green energy products over the next three years while scaling back capital spending for television and other home electronics.
"This biggest business chance of this era is to build an enterprise focused on the environment," said Fumio Ohtsubo, president of Panasonic at a news conference. "We are going to boldly shift our management resources."
Under a three-year business plan ending March 2013, Panasonic said it plans to allocate 300 billion yen, or $3.3 billion, to what it calls its "flagship" energy systems business, which also includes Panasonic's existing fuel cells unit. It plans to invest 220 billion yen into its consumer electronics arm over the next three years—or about one-third of its investment in the three years just ended.
The Japanese electronics conglomerate, long focused on the home electronics market, took the first step toward building a green energy business with its $4.4 billion acquisition of a majority stake in smaller rival Sanyo Electric Co. in December. While Sanyo has lost money in five of its last six years, the company is the market leader in rechargeable lithium-ion batteries, the critical technology for electric and hybrid cars, and a presence in the solar panel industry.
On Thursday, Sanyo reported its net loss had narrowed by half in the previous fiscal year while revenue fell 9.9%. One worrying sign in Sanyo's results was a 8% decline in full-year revenue from its energy business as the unit's profit halved to 23.8 billion yen as it struggled to slash prices to keep pace with Korean rivals.
Panasonic also had a rough year, announcing Friday along with its mid-term plan that it lost money for a second straight year due in part to charges related to ongoing restructuring efforts. It expects to return to profit this fiscal year on improving conditions and progress in cost-cutting.
In the three-year business plan named "Green Transformation 2012," Panasonic announced targets for annual revenue of 10 trillion yen by March 2013 and an operating profit margin exceeding 5%. In the fiscal year just ended, Panasonic reported revenue of 7.418 trillion yen with an operating profit margin of 2.6%.
To meet those goals, Panasonic is banking on revenue growth of nearly 60% from its energy business in the three-year period while breaking into new opportunities in healthcare, security and next-generation lighting.
Hiroshi Sakai, an electronics industry analyst at Tokyo-based SMBC Friend Research Center, said this strategic shift is the logical next step after its acquisition of Sanyo.
"This is the right direction for Panasonic but then again it's the only direction with any potential," said Mr. Sakai. "This is pretty much the only way that Panasonic can differentiate itself from its rivals."
Even Panasonic's former flagship product, flat-panel televisions, is getting a green-wash. The company said it will promote its televisions as an environmentally friendly option because 60% of its LCD televisions will be illuminated by brighter and less power-consuming light-emitting diodes by March 2013.
Panasonic said it plans to sell 21 million televisions this fiscal year to March 2011 compared to 15.8 million units last fiscal year. Rival Sony Corp. has said it plans to sell 25 million LCD televisions this fiscal year.
Panasonic has invested heavily to build factories in Japan that would manufacture panels for plasma and liquid crystal display televisions, but it has struggled to make a profit in a cutthroat industry characterized by relentless declines in prices. Like other Japanese brands, Panasonic is also running behind South Korea's Samsung Electronics Co. and LG Electronics Inc. in terms of efficiency and global brand awareness.
In the January-March quarter, the company's restructuring helped to narrow its net loss to 88.9 billion yen from a 444.3 billion yen loss in the same period a year earlier.
On an operating basis, which excludes charges related to restructuring, Panasonic returned to the black with a profit of 60.6 billion yen in its fiscal fourth quarter from a 181.6 billion yen loss in the year-ago period. The Sanyo acquisition helped to boost revenue in the January-March quarter by 43% to 2.198 trillion yen from a year earlier. Excluding Sanyo, sales rose 16%.
Mr. Ohtsubo said Panasonic also plans to eliminate areas of overlap and loss-making businesses. While he didn't specify what areas were being targeted for cuts, he said Panasonic will exit businesses generating 300 billion yen in revenue over the next three years.
Osaka-based Panasonic forecasts a net profit of 50 billion yen this fiscal year on revenue of 8.8 trillion yen. It based those projections on foreign exchange assumptions of 90 yen to the dollar and 120 yen to the euro.
source: http://online.wsj.com/article/SB10001424052748703338004575229502432873566.html?mod=WSJ_hpp_sections_tech