Panasonic Loses 20% of Its Value

on Nov 1, 2012

The share price of Panasonic (TYO:6752), Japan’s second-biggest TV maker, plummeted by the daily limit in today’s Tokyo trading session after the company forecasted a loss of ¥765 billion (£5.93 billion) for the Japanese fiscal year ending 31 March. The new forecast is thirty times below analysts’ expectations and is the result of numerous restructuring costs and falling demand.

“It’s unfortunate, but we are among the losers in consumer electronics,” Kazuhiro Tsuga, who became president this year, told a news conference.
The stock dropped by 19.46 percent to a closing price of ¥414 as investors went into an expected panic sell-off. The impending second-highest loss for Panasonic in its entire history prompted the company to announce it won’t be paying dividends for the first time since 1950 because of an “urgent need” to improve its financial standing.

“There’s no sign declines in sales of audiovisual and communication products such as TVs and smartphones will stop,” wrote Shiro Mikoshiba, an analyst at Nomura Holdings Inc, in a report released following the earnings announcement “Whether the company’s transformation can be carried out with a soft landing is becoming more uncertain.”
!m[“We Are Among The Losers In Consumer Electronics” CEO Kazuhiro Tsuga](/uploads/story/695/thumbs/pic1_inline.png)Panasonic, with a current market capitalization of about £7.9 billion, reduced its workforce by an estimated 39,000 jobs or 11 percent, which amounts to almost double of what Sony and Sharp combined shed. Despite the massive dismissals, the TV maker remains the third-largest Japanese employer with estimated 321,896 workers on its payroll as of 30 September, trailing behind Toyota Motor’s 328,762 and Hitachi’s 327,325. Most analysts agree Panasonic still has a lot of “fat” to cut in order to get back in shape.

“They have to cut, cut, cut,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, as quoted by Bloomberg “They’re not doing it fast enough. You have to be lean and mean.”
“Cutting jobs would be the path the company has to take,” opined Makoto Sengoku, a Tokyo-based market analyst at Tokai Tokyo Securities Co. “It would be good if we knew that Panasonic had considered all the negative scenarios.”

The company is actively scaling back businesses that do not add to the bottom line: “We believe we have removed everything that posed a writedown risk,” commented Panasonic’s CFO Hideaki Kawai. A total of ¥238 billion in goodwill related to the mobile phone unit and the business in lithium batteries and solar panels will be written off in the second half of Japan’s fiscal year.

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Panasonic also announced plans to shrink its mobile department in Europe in the next six months. It’s the same thing the company did in 2005 when it pulled out of Europe sometime during that year and just returned to market its mobile phones there in early spring of 2012. The approach taken by Mr Tsuga is the opposite of what Sony (TYO:6758) plans to do, which is to double down on consumer electronics and push harder into the mobile devices market.

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