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Japanese Suppliers Report Progress, But More Work Needed

In the past two days Panasonic, Sony, Sharp and Toshiba reported on their fiscal first quarter results (ended June 30), and, in varying degrees, there has been progress as they try to emerge from prolonged losing streaks.

The problems began with the worldwide recession, the after-effects of the Japanese earthquake of two years ago, and the overvaluation of the yen. It also includes longtime problems, such as heavy price promotions; large workforces; the popularity of mobile products that, in some cases, have cannibalized established categories; and strong competition from Korean and Chinese competitors.

The new monetary policy for the yen by Japanese Prime Minister Shinzo Abe have helped the bottom lines of these three companies, as well as the slow recovery from the recession is helping, but there are still individual challenges for each of the four Japanese manufacturers.

Panasonic reported a profit on lower sales, due to cutting costs, but in the CE business sales were lower and its CE’s operating loss was about the same as the prior year.

Sony returned to profitability corporately, and the TV business recorded a profit in the quarter, along with gains in its smartphone business. But imaging sales were down, game sales were flat and Sony stockholder Daniel Loeb of the Third Point hedge fund is still pushing management to spin off its entertainment properties.

Sharp has been in the toughest financial spot of these companies, yet it reported double-digit sales gains over last year and an operating profit versus last year’s loss, due to higher sales of smartphones and LCD TVs. But while dramatically reduced, there is still a net loss to deal with.

Toshiba reported a corporate profit and higher sales, but in CE (including the computer business) sales were just about flat and its operating loss deepened.

Yes, each company can look to progress made in their opening quarters of the fiscal year. But plenty more has to be done, in terms of product mix, profitability and good, old-fashioned innovation in technology products, to right their operations for profitability in the near future and beyond.