Sony sells its half stake in TV joint venture to Samsung

Television manufacturers are outsourcing LCD screens production as competition and weak demand squeeze profits Photograph Thomas Collins/Getty

Sony has sold its nearly 50% stake in joint venture with Samsung Electronics to the South Korean company for $940m (?602m), as the Japanese company struggles to cut its losses at its TV business.

The venture for liquid crystal display (LCD) had been subject to rumours that Sony was negotiating an exit, aiming to switch to cheaper outsourcing for flat screens for its TVs while Samsung pushes ahead with next-generation displays.

"In terms of direction it is a positive [for Sony]," said Keita Wakabayashi, an analyst at Mito Securities in Tokyo, about the deal. "But if they are making a loss on the sale, one could ask why they didn't make this decision sooner."

"Their biggest problem is that they are not making a profit even though they don't have many plants," he said.

In November, Sony, the world's third largest flat panel TV maker, warned of a fourth straight year of net losses for the financial year to next March, with its TV unit alone set to lose $2.2 bn on tumbling demand and a surging yen.

The company said on Monday it would review its earnings forecast to reflect ?66bn in impairment losses from the transaction.

While the sale is seen as a move in the right direction for Sony, it will not be good for Samsung, analysts said.

"Sony may shift to Taiwanese LCD makers should they offer cheaper prices," Song Myung-sup, an analyst at HI Investment & Securities, said in Seoul. Shares in Sony ended 1.6% higher, compared with a 1% gain in Tokyo's benchmark Nikkei average, while Samsung Electronics shares fell 0.2%.

Sony's panel venture with Samsung, S-LCD, was established to secure stable supplies for Sony's flat-screen TVs at a time of shortages.

Once a symbol of Japan's high-tech might, Sony has sold off TV factories in Spain, Slovakia and Mexico in the past few years and outsources more than half of its production while retaining four TV plants of its own ? in Japan, Brazil, China and Malaysia.

Some analysts say the $100 bn LCD TV market peaked last year and forecast it will shrink 3 to 4 % annually, as consumers in advanced countries have traded in their bulky cathode-ray tube TV sets for flat screens, while the LCD market has been in a glut since last summer.

Global TV manufacturers are restructuring their businesses and outsourcing production as cut-throat competition and weak demand squeeze margins.

Analysts have criticised Sony for failing to aggressively take on the competition in the TV market from South Korean rivals Samsung and LG Electronics, the largest and second-largest players, respectively.

In November, Sony cut its TV unit sales forecast for the second time this year and dropped a plan to boost its TV sales to 40m sets in the year ending March 2013, conceding defeat to Samsung, the world's largest flat-panel TV maker.In April, Sony said it would not raise its stake in a separate LCD venture with Sharp for at least a year, and in August said it would merge its loss-making small-panel business with the government-backed Japan Display.

In October, it signalled a push into the smartphone market by announcing it would take control of its mobile phone joint venture with Ericsson for $1.5bn.

Source: http://www.guardian.co.uk/technology/2011/dec/26/sony-smasung-tv-joint-venture

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