Is Matsushita Losing Its Mojo?
Has Matsushita Electric Industrial’s («www.businessweek.com») growth engine started to sputter? It’s a question that a growing number of financial analysts are asking about the company’s TV business, and CEO «investing.businessweek.com» will be hard-pressed to come up with answers.
On July 25, the Japanese technology giant reported first-quarter profit gains for the sixth straight year. But that was almost an afterthought to bad news a day earlier, when the company revised downward its forecast for full-year earnings after announcing the sale of part of its stake in ailing Victor of Japan («www.businessweek.com»). The revision spooked investors and triggered a sell-off that left the company’s shares 3.6% lower.
Among the biggest worries: lower-than-expected flat-screen TV sales in North America. Ohtsubo himself had expressed concern earlier this year that plasma TV makers were forfeiting ground in the face of a marketing blitzkrieg from liquid-crystal displays, the rival flat-panel technology. That observation from the man whose company has one-third of the global plasma TV market now seems prescient. Yen’s Weakness Helps
Of course, nobody thinks plasma is about to get ousted completely by LCDs. Plasma producers still rule in big-screen TVs because they can make large panels at a lower cost than LCD producers can. But the market outlook doesn’t seem as sunny as Matsushita had hoped, and LCD makers are quickly closing in.
In the fiscal first quarter, Matsushita’s operating profit rose 13%, to $615 million, despite a modest 5% gain in sales, to $18.6 billion. Strong sales of digital cameras, video cameras, DVD recorders, and household appliances, along with the yen’s weakness, were behind the gains (see BusinessWeek.com, 2/1/07, «www.businessweek.com»). But full-year profit and sales forecasts were revised down 5%, to $3.97 billion, and $73.1 billion, respectively, due to the accounting change after Matsushita issues $290 million worth of JVC shares to Japanese consumer electronics company Kenwood («www.businessweek.com») and Kenwood’s biggest shareholder, the «investing.businessweek.com», a fund.
At first glance, the TV business doesn’t look bad. From April to June, Matsushita sold 800,000 plasma TVs, a 31% improvement over the 610,000 sets it sold in the same three-month period last year. Overall flat-panel TV revenues were up 2% as well. But the company needs to pick up the pace if it’s to reach its target of shipping 5 million sets this year—a 43% gain from 3.5 million. ‘On Track’ for Targets
Another troubling trend: a fall in first-quarter TV revenues in Japan and North America. Matsushita’s chief financial officer, Makoto Uenomura, blamed competitive prices, and said prices had fallen 29% in the quarter from the same period a year ago. But Uenomura said he was confident Matsushita was “on track” to hit its targets, and dismissed rising inventories. “We’re just switching to a new lineup of high-definition TVs in Europe and the U.S. so the inventories you’re seeing are new products, not old,” Uenomura told reporters. “We’re not worried.”
Maybe they should be. Even before Matsushita’s first-quarter numbers were released, some analysts had already lowered their volume sales estimates. Morgan Stanley («www.businessweek.com»), for one, challenged Matsushita’s forecast that the global plasma TV market would expand to 12.5 million sets this year, from around 9.7 million in 2006. The brokerage has global plasma TV sales at between 10 million and 11 million.