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Flat-Panel Blues

?Doesn't anybody around here know how to play this game?? So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

“Doesn't anybody around here know how to play this game?” So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

The comment came to mind after hearing the 2007 fiscal year results from several of the display industry's heavy hitters. Most of them were not good, and in some cases, the losses were substantial.

Sony Corp. reported a net loss of just under $2 billion in its games division, mostly because of missed sales targets and excess inventory of its flagship PlayStation 3 product. While its other divisions, including TVs and other displays, did reasonably well, they couldn't prevent a 68 percent drop in operating income from fiscal 2006.

Pioneer Electronics, which at press time had not officially released its fiscal year results, managed to flip analyst's expectations on their heads and turn a projected $40 million profit into a $56.3 million loss for the past fiscal year. The company blamed it primarily on a steep downturn in plasma prices, which also was exacerbated by an overall decline in plasma shipments for the first quarter of this year.

Matsushita Corp., parent company of Panasonic, has made heavy investments in plasma fabrication and expects to manufacture 11 million panels a year by 2008. It managed to increase net income by 18 percent to $1.8 billion for the most recent fiscal year, but missed its target of $2 billion. Former subsidiary JVC — which should be sold to the TGP Group by the time you read this — rang up $64 million in losses for the same time period.

How about the Koreans? LG Electronics, which proudly bills itself as the largest manufacturer of flat-panel HDTVs in the world, incurred more than $140 million in net losses from plasma manufacturing in 2006. Samsung SDI, the company subsidiary that manufactures plasma, reported a net loss of $77 million for the first quarter of 2007, while Chinese LCD manufacturing giant AU Optronics racked up a $152 million loss in the same time period.

Hitachi Electronics' fiscal 2007 net loss of 32.8 billion yen (about $271 million) was, no doubt, a contributing factor in the company's decision in February not to expand capacity at its Kyushu plasma operations, Fujitsu Hitachi Plasma Display Ltd. Also driving that decision was 20 percent in annual decreases in ASPs of plasma HDTVs. Pioneer also shelved plans to expand its plasma manufacturing capacity anytime soon.

Yikes! Is there nothing but bad news coming out of Asia these days? It certainly seems so, given how all of the once-legendary Japanese consumer electronics brands are struggling to maintain profitability.

While Sony's drop in net income is directly attributable to losses incurred both in manufacturing and selling PlayStation 3 consoles, the company still posted an operating profit and remains strong in sales of rear-projection and LCD HDTVs.

Matsushita, under pressure from investors to push profit margins above 5 percent, finally agreed to put its 52 percent stake in JVC up for sale, and likely will see a boost of more than $600 million to its bottom line as a result. In the meantime, JVC could be broken up and sold off, most likely to Chinese interests that see tremendous value in the brand.

Pioneer's losses are attributable to its position at the high end of plasma HDTV pricing. With a small share of the North American plasma market (about 8 percent in 2006) and less manufacturing capacity than the other four plasma manufacturers, the dog-eat-dog flat-panel pricing wars are slamming the company.



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