TOKYO — In a bid to streamline its money-losing television business, Sony said Monday it would sell its stake in its flat-panel joint venture with Samsung Electronics, letting go of more of its production capacity at a time when outsourcing has become the norm in the world of manufacturing.
Sony, the Tokyo-based technology and entertainment giant, which makes the Bravia liquid-crystal display televisions, said in a statement
that it would sell its nearly 50 percent stake in the jointly-owned manufacturer, S-LCD, to Samsung of South Korea for 1.08 trillion won, or $939 million.
Sony’s exit from the joint venture, set up in Tanjeong, South Korea, in April 2004, would allow it to switch to less expensive outsourcing options that might allow it to resuscitate its struggling TV business. The only other LCD panels Sony manufactures are at its joint venture with Sharp, in which Sony owns a 7 percent stake.
Cutthroat competition in a peaking market is squeezing margins for TV manufacturers, especially Sony, which analysts have long criticized for high production costs. A strong yen has also weighed on Sony’s bottom line by eroding the value of its overseas earnings when repatriated into the home currency.
Last month, Sony warned that it would lose money for the fourth year in a row in its current financial year, which ends next March. Its television unit alone is contributing billions of yen in losses.
Sony said it would report a further impairment loss of 66 billion yen, or $856 million, for the last three months of 2011 due to its exit from the Samsung joint venture. But it expected to slash costs in its LCD business by 50 billion yen a year as a result of the move, it said in the statement.
Sony “aims to secure a flexible and steady supply of LCD panels from Samsung, based on market prices and without the responsibility and costs of operating a manufacturing facility,” it said in the statement.
Meanwhile, Samsung Electronics, the world leader in flat-panel TVs, would have freer rein in producing its next-generation displays by taking control of S-LCD. The manufacturer said in a regulatory filing that its board had approved of the plan Monday.
The roots of the Sony-Samsung alliance go back to the late 1990’s, when Samsung emerged from the Asian financial crisis as a powerhouse, thanks to relentless cost-cutting and aggressive overseas marketing.
At the same time, Sony was falling behind in several important markets, most notably in computer displays and flat-panel TVs, where the once cutting-edge manufacturer still clung to the older technology of cathode ray tubes while consumers flocked to LCD and plasma-screen TVs.
In the face of total defeat in TVs, Sony looked to Samsung to reverse its flagging fortunes, forging a series of deals, including the $2 billion state-of-the-art LCD joint venture in South Korea. The companies also together backed the Blu-ray disc format and have entered into patent-sharing relationships.
For Samsung, those deals came as an acknowledgment of its emergence as a global player. The South Korean manufacturer has now taken over from Sony as the consumer electronics king. In its latest full financial year, Samsung earned $14 billion on sales of more than $134 billion, while Sony lost $3 billion on sales of $92 billion.
In comparison, Apple, the world’s most profitable consumer electronics company, earned $25.92 billion on sales of $108 billion.
Article source: http://feeds.nytimes.com/click.phdo?i=9b248431df6ea4f2e25b2fba3cb43ba8