HDTV Pricing And Profits(?)
By Steve Smith -- TWICE, 11/6/2006
With just about every major Japanese CE manufacturer on the same fiscal year schedule, April to March, the last couple of weeks has given us a pretty good picture about the specific financial health of individual companies and that important group of vendors as a whole.
For most of the companies reporting sales were good and the only major concern, even if they posted profits for the most recent quarter or the half, are the familiar tag team of lower prices and eroding profit margins.
Of course the major exception was Sony. Who would have thought that lithium batteries could explode? (Obviously Sony didn't, and really nobody else did either.) The battery recall, plus PlayStation 3 delays, hammered Sony's profits. The immediate good news for Sony was that its television sales, driven by BRAVIA LCD TVs, were up in the quarter more than 46 percent to $2.13 billion. But in its core electronics segment, where TV is a major factor, operating profit was down 71 percent.
When you look at financials from its arch-rival Panasonic (see p. 4) and other Japanese suppliers (see p. 49) whether their consolidated sales and earnings are up, or their CE sales are good or at least improved, profits are a concern as HDTV begins to dominate their businesses.
For instance Pioneer had a sales gain of 6.8 percent in home electronics during its second quarter, citing plasma displays in North America generating 46 percent of the CE group's sales. But its home electronics operation posted a loss, albeit a smaller one than last year's second quarter. Several other major brands are challenged in the same way.
But as we approach this Black Friday and the core of the holiday sales season, a season that will probably be remembered as the one HDTV finally entered the mass market, price cuts have been announced even though demand is high and inventory is okay. (Since I never got an MBA, I can never understand this industry's reasoning.) Another price move, or two, won't surprise anyone by Dec. 25.
Of course for many industry veterans out there, this is an old story. One is reminded of the cries of "You can't eat market share!" or my favorite "We'll give it away and make it up in volume!"
What's different this time is that digital technology evens the manufacturing playing field. There is less time for a manufacturer who has a unique technical advantage to make enough money to reinvest those profits in the next big technology.
And more importantly for Japanese CE technology leaders, as well as Korea's Samsung, LG and others, is the emergence of aggressive, low-cost suppliers from China. While major brand names are now blanketing the TV airwaves with ads for their HDTVs, some of the smaller guys from China are appearing on cable hyping low-cost HDTVs.
In such a situation the consumer, as always, wins. Many established CE probably are not worried much about winning. They just want to stay in the game as a credible competitor when the dust settles.
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