Japan's Panasonic Corp. forecast a record net annual loss of $10.2 billion on Friday, joining beleaguered rival Sony Corp. in a sea of red ink, both struggling to fix their broken TV businesses and overcome criticism that they have lost their way.
Panasonic, posting quarterly results, said it was headed for a loss of ¥780-billion ($10.2-billion U.S.) for the year to March, dwarfing expectations for a loss of around $6.2 billion. The loss was almost entirely due to restructuring charges and writedowns, including to its Sanyo Electric unit.
Panasonic, which is in the process of shedding 17,000 jobs by end-March, also missed third-quarter market forecasts, diving to a loss of ¥197.6-billion from a profit a year earlier.
Its grim outlook follows forecasts from Sony and Sharp Corp. for combined losses of $6.7 billion, highlighting the impact on Japanese consumer electronics firms of fierce competition from foreign rivals such as South Korea's Samsung Electronics, weak demand and a strong yen.
With TVs becoming smart - linked to other devices like tablets and smartphones - an inability to win in the TV market risks hobbling sales across their consumer electronics line-up.
"Panasonic, like Sharp and Sony, has structural problems," said Makoto Kikuchi, CEO of Myojo Asset Management in Tokyo, noting all three need to come to grips with problems in their TV businesses.
Yet with a slump in market share overtaking that effort, it may need to spend more to squeeze a TV business it refuses to give up on to keep it viable.
Speaking at a consumer electronics conference last month, Panasonic President Fumio Ohtsubo dismissed the idea of ditching TVs, a unit that accounts for around 1 trillion yen in revenue.
"At the core of our latest restructuring was to make our TV unit profitable," Ohtsubo told reporters in Las Vegas. "Panasonic's TVs may one day be a case study of a recovery," he added, citing an example of Japanese material companies that spent 50 years to develop successful carbon composites.
The near term outlook for improved sales, though, is grim.
By 2015, flat panel industry research company DisplaySearch expects annual global sales of liquid crystal TVs to contract by 8 per cent to $92 billion. Even worse, plasma sets, a market that Panasonic dominates, will shrink 38 per cent to $7 billion.
If Panasonic's market share "keeps shrinking by 10 per cent or so they may need to prepare some more restructuring," said Shiro Mikoshiba, analyst at Nomura Holdings in Tokyo.
Moody's Investors Service downgraded the debt ratings of Panasonic and Sony last month and retained a negative outlook for both, citing their continued losses on TVs.
It's not only the TV unit, however, that poses a risk to profits and is keeping investors away from Panasonic shares, say analysts. Its stock slumped to a record low soon after Ohtsubo touted his restructuring efforts at the Las Vegas conference.
"They don't seem like a company that's progressing towards a particular goal," said Yuuki Sakurai, CEO and president of Fukoku Capital.
"It's probably the same for Sony, Panasonic and all electronics conglomerates. What exactly is this company good at? What does it want to do? They don't have answers to these questions."
Panasonic shares initially fell on Friday, extending a slide to their lowest in more than 30 years. But they recovered ground during the day, closing up 1.2 per cent just ahead of the release of its quarterly results.
Sony on Thursday pressed its reset button by announcing that Kazuo Hirai will succeed Howard Stringer as CEO in April, sparking an 8-per-cent surge in its share price on Friday, its biggest one-day percentage gain in almost a year.
Mr. Ohtsubo, who like Stringer at Sony has called the shots at Panasonic for the past six years, has so far shown no intent to step aside.