November 4, 2011 12:43 pm

Sony retreats from making TVs

Sony has announced a significant retreat from television manufacturing – a business that vaulted it to global prominence 40 years ago but has since become an unprofitable burden.

The Japanese electronics and entertainment group this week slashed its midterm sales target for liquid-crystal display TVs by half, from 40m to 20m, giving up on an ambitious goal it had set only in 2009. The business has been in the red for the past eight years.

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High production costs, which have been compounded by the soaring value of the yen, have made it difficult for Japanese companies to compete with South Korean and Taiwanese rivals. Panasonic, another Japanese gadget-maker, also announced major cuts in TV production this week.

Sony projected a fourth consecutive annual net loss, of Y90bn ($1.15bn), owing to slack sales and write-offs of past investments in the TV sector. It is negotiating with Korea’s Samsung to dissolve a panel-making joint venture between the two companies, said people familiar with the matter.

The venture, run by Samsung, is costing Sony hundreds of millions of dollars a year in operating fees and penalties that it must pay its Korean partner if it does not order enough panels.

Sony expects the restructuring to return the TV business to profit by the fiscal year ending in March 2014. However, investors – many of whom would like to see it withdraw from TV manufacturing completely – appeared unconvinced. Sony’s shares dropped 8 per cent on Friday, the first trading day since the restructuring was announced on Wednesday.

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