TV Makers Brace For Sluggish Holiday Season - InformationWeek

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11/1/2010
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TV Makers Brace For Sluggish Holiday Season

Leading electronics manufacturers Sony, Panasonic, Samsung and LG anticipate dismal sales and price drops during the critical holiday buying period.

With the world’s four largest TV makers projecting dismal sales for the fourth quarter and analysts painting an equally gloomy picture, indications are it will not be a merry Christmas for electronics manufacturers.

Sony Corp. said it will not see profits from its television business this fiscal year and Panasonic Corp. is also forecasting higher price drops for this quarter. Other dire predictions have already come from Samsung Electronics, which echoed similar sentiments from LG Electronics Inc. that it too is bracing for severe competition for the biggest sales quarter of the year.

Adding to the buzz is speculation from some analysts that there may be price declines as much as 25% this year. With the jobless rate nearing a 26-year high and consumers remaining reluctant to spend, companies are hoping for greater demand in corporate purchases. Analysts say this is leading to price wars during the Christmas season as retailers adopt a sell-earlier-and-for-less strategy.

Although TV makers were hoping the trend toward more expensive 3-D sets and brighter LED screen televisions would keep prices from being cut, U.S. consumers apparently aren’t biting. Television prices are typically reduced to between 20% and 25% annually, Atul Goyal, a senior research analyst at CLSA Asia-Pacific Markets in Singapore, told Bloomberg. “Consumers are saying, ‘I like the product but I don’t want to pay a 30 percent premium to the other one. I’ll wait,’ ” Goyal told Bloomberg. “Prices will have to come down. That’s a given.”

In the hope of moving merchandise, retailers, including Target Corp. and Wal-Mart Stores Inc., are already lowering prices on items like toys to try to entice shoppers.

Brava TV maker Sony is predicting a loss this year and anticipating steep competition, CFO Marau Kato said. Its 3D TVs are lagging behind Sony’s earlier expectations that it would bring in 10% of the annual 25 million TV sets goal, Kato said.

Due to better-than-expected games and computers earnings in the third quarter ended Sept. 30, Sony, the world’s third-largest TV maker, raised its 2010 net income forecast by 17%, to 70 billion yen ($867 million). The Tokyo-based TV maker said it has a cautious outlook for the rest of the year. While it did not give specific figures, Sony said its main electronics unit, which makes TVs, anticipates lower total year profits than originally thought.

Although its earnings in the first half exceeded expectations, Panasonic, the world’s largest maker of plasma TVs, including Viera TVs, did not raise its total yearly profit forecast. Panasonic said it attributed the decision to more expensive raw materials, falling prices and the stronger yen.

The world’s two largest TV makers, Samsung and LG, have also expressed similar concerns. While Samsung saw a record high in the period ending Sept. 30, the South Korean company forecast its earnings would drop and that it is expecting intense competition in the TV market in the fourth quarter. LG’s fourth-quarter TV set prices may decline as much as 8% from the previous period, citing a move by TV makers to clear inventory, CFO David Jung told Bloomberg.

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