Tokyo: Another quarter and still the same set of problems.
Top Japanese electronics makers such as Sony Corp are set to post smaller quarter-on-quarter losses as cost cuts help counter the impact of sharp price falls and sluggish demand.
Panasonic, Sharp and Sony are however likely to offer a muted outlook as they struggle with a firmer yen and an uncertain economic environment.
The yen’s strength makes their products less price-competitive overseas at a time when Samsung Electronics Co Ltd and other South Korean rivals are benefiting from a softer won.
“It’s no one’s secret that they are suffering from weak sales. On the other hand, each of them has pressed ahead with restructuring steps since late last year,” Daiwa Institute of Research analyst Kazuharu Miura said.
“One important point is how well those measures are helping shore up their profits in the face of lower revenues. That can be an indicator of their second-half profit.”
Sony is in the process of cutting about 16,000 jobs, and also plans to close 8 manufacturing sites by December and slash the number of its suppliers by half by March 2011.
These steps have helped the maker of Bravia LCD TVs and PlayStation games cut losses at its TV and video game operations, but have fallen short of making them profitable, analysts said.
Sony’s game and flat TV operations, which compete with larger rivals Nintendo Co Ltd and Samsung, respectively, have been the company’s major drag on earnings in recent years.
To improve profitability at its struggling LCD TV unit, Sony plans to take a stake in Sharp’s new LCD plant, which is capable of producing TV panels at lower costs than existing factories.
Sharp’s LCD operations are likely to have remained in the red in April-June despite higher panel prices, analysts said. Sharp sells its panels to other TV makers and also uses them in its own TV sets.
“Sharp depends more on contract-based sales than on spot sales, and their sales price lags the overall price trend. They may not have been able to fully enjoy higher spot prices in April-June,” Mizuho Securities analyst Ryosuke Katsura said.
Tokyo stock market’s electrical machinery index rose 25% in the latest quarter, broadly in line with a 23% rise in the broader Nikkei average.
Anaemic Corporate Spending
Panasonic is expected to join Sony and Sharp in posting a first quarter loss, with its factory automation equipment division hit hard as companies rein in capital investments.
The maker of Viera flat TV and Lumix digital cameras may update markets on its planned acquisition of Sanyo Electric Co Ltd, the world’s largest rechargeable battery maker, as it looks to become a dominant player in hybrid car-use batteries.
Canon Inc likely stayed profitable in April-June thanks to brisk demand for high end digital single lens reflex cameras, though weak corporate spending hit sales at its copier and printer business.
Investors will also look out for recovery signs at Canon’s cash-cow laser beam printer (LBP) business.
“Canon’s LBP business is highly profitable and tends to account for more than 40% of its overall operating profit. If recovery becomes certain in that segment, that would impact its share price,” JPMorgan analyst Hisashi Moriyama said.
Nintendo, which shrugged off a global downturn to post record profits last year, is expected to report a sharp slide in quarterly operating profit as sales of its Wii game machine lost steam in the key US market due to lack of strong new titles.
Analysts expect demand to pick up later in the year as Nintendo’s major titles go on sale before the holiday season. However, they see strong growth nearing an end for the Wii, which once helped Nintendo raise annual outlook every few months.
“I’m afraid Nintendo is entering a period where we should be careful more about negative developments, rather than positive ones,” Rakuten Securities analyst Yasuo Imanaka said.