- Philips Having Trouble Selling TV Business
- Panasonic Closing Plasma Plant
- LG Display Reports Loss in Q3 from Profit a Year Ago
Hello, Sony and your struggles to make a success out of your TV business. It looks like Intel was right about the future of TV sets. It’ll be a pricing world: square inches of screen per dollar with a smart TV platform as an assumed feature and no room for pricey innovations, especially as the demand for 3D at home stays low.
European CE king Philips Electronics is having trouble selling its money-losing TV operations by year-end as it had promised. Who wants it? Who needs it? Samsung, LG and now the Chinese makers of TV sets are taking volume away from traditional makers of TV sets like Philips and Sony.
Philips CEO Frans van Houten said, “The global TV market has deteriorated, and obviously the sooner we complete this the better, but we first need to finalize the negotiations, and whether we can do that this year or into the first quarter of 2012, there are some uncertainties with that planning.”
Intel last week said it is abandoning its smart TV business because of the pricing pressure on TV sets’ retail prices, which will increase even more when two large new display factories are opened in China. Sony, Toshiba and Hitachi have joined together with a government-backed fund to spin off and merge their LCD businesses. More evidence is that 60-inch TVs are going for $1,200 and this year’s model of a 42-inch LED smart TV from LG is being sold in the States for $650 including delivery to the home.
Philips is no slouch at CE gear, being the largest CE maker in Europe and world’s largest maker of lighting. Perhaps like the prior management at HP, Philips is finding that today’s CE industry moves too fast for it to keep up.
Philips has been negotiating to sell its TV business to Hong-Kong’s display maker TPVTechnology but the talks have slowed. TPV appears to be in the driver’s seat, what with Philips desperate to get out of TVs as soon as possible and having already promised shareholders that it would.
Van Houten seemed to indicate that the negotiations could fail by saying, “For the eventuality that a final agreement cannot be reached, Philips will consider its alternative options.” There are few if any other companies that Philips could sell the TV business to, at any price. It may have to take a very low price, much lower that it had hoped, or give it away or even close it down.
In April, Philips gave 70% control of its TV operation to TPV. Philips was to get royalties of at least €50 million ($72 million) annually starting in 2013. Philips lost €87 million on TVs in the first quarter. Van Houten said at the time it would have taken more than a tweak to stop the losses in TV sets. In 2004 TPV had already acquired Philips’ PC display business for about $358 million in 2004. Philips sold its pay-TV STB business to UK-based Pace for cash and stock.
Even if Philips makes a deal, the Dutch and EU governments plus the labor unions will all have to be mollified, which could string out a final solution for months.
Like Sony’s TV business, Philips TV operations have been spinning red ink — totaling €1 billion in the last four years. Unlike Sony’s, Philips’ TV operation does not dominate the company’s financials, accounting for only about 10% of revenue.
Philips wrote down €1.3 billion in its second quarter due to weak consumer demand at its lighting and healthcare units. It is undertaking an €800 million cost savings plan that will cut another 4,500 employees in addition to the 6,500 it has already terminated. It has twice reduced its expected earnings.
It has not said what if any back up plan it has if the TPV deal falls through. It better start working on one or two although we ask again,” Who would want it?”
Panasonic Closes Plasma Plant & Cuts Jobs
Panasonic, whose plasma TVs are generally given high marks, is responding to the fierce price competition and weak demand in the market by reducing production of plasma TV panels and cutting several thousand jobs, according to Reuters. Panasonic will entirely stop producing plasma panels at one plant, which is the largest maker of the glass screens that go into plasma TVs and is capable of making 330,000 panels a month. It may also close or sell a LCD panel factory.
Panasonic told Reuters it is considering various plans for its TV set business, but had nothing to announce.
It would be a shame if Panasonic plasma TVs disappear from the market just as it was when Pioneer plasma TVs disappeared, then considered the best on the market. Panasonic ultimately acquired Pioneer’s plasma TV technology.
LG Too
LG Display reported a third quarter loss from a year-ago profit because of weak demand worldwide for TVs and fierce price competition. LG trails only Samsung in making flat-panel TVs.
The company said the price of its LCD panels dropped 10% during the quarter compared to a year-ago.
LG is counting on 3D sets to sell well and has purposely marketed itself as the leader in producing 3D sets. It is also counting on continued growth in smart phones and tablets because it makes the panel for Apple’s iPhones.
DisplaySearch predicts that worldwide shipments of LCD TVs will be 206 million units this year, but that’s fewer than the 211 million units it had previously predicted.
Let’s hope lots of consumers buy a new TV set to watch next summer’s London Olympics — and that they are all smart TVs.
Sony, beware. Be very wary.
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