Sony to sell stake in LCD venture

2011-12-26 11:09

Tokyo / Seoul - Sony Corp has agreed to sell its nearly 50% stake in an LCD joint venture with Samsung Electronics to Samsung for $940m, the Korean firm said on Monday, as Sony struggles to staunch red ink at its TV business.

The venture cut its capital by 15% in July and industry sources had said Sony was negotiating an exit, aiming to switch to cheaper outsourcing for flat screens for its TVs while Samsung pushes ahead with next-generation displays.

Sony warned in November of a fourth straight year of losses for the financial year to next March, with its TV unit alone set to lose $2.2bn on tumbling demand and a surging yen.

The maker of Bravia TVs and PlayStation game consoles said at the time it would revamp its LCD panel procurement but did not comment on the outlook for the LCD venture with Samsung.

"In terms of direction it is positive," said Keita Wakabayashi, an analyst at Mito Securities in Tokyo. "But if they are making a loss on the sale, one could ask why they didn't make this decision sooner."

Some analysts say the $100bn LCD TV market peaked last year and forecast it will shrink 3% to 4% annually, as consumers in advanced countries have already traded in their bulky cathode-ray tube TV sets for flat screens, while the LCD market has been in a glut since last summer.

Sony said in April it would not raise its stake in a separate LCD venture with Sharp Corp for at least a year, and in October signaled a stepped-up push into the smart phone market by announcing it would take control of its mobile phone joint venture with Ericsson for $1.5bn.

The company is hoping to exploit its music and video applications to help it catch up with smartphone leaders such as Apple Inc.

Sony said on Monday it would report a 66bn yen ($856m) impairment loss for the October-December quarter but expected to cut 50bn yen in annual costs in the LCD business by ending the venture with Samsung.

Sony holds a nearly 50% stake in the venture, S-LCD, which was established in April 2004 to secure stable supplies for Sony's flat-screen TVs.

Shares in Sony ended 1.6% higher, compared with a 1% gain in Tokyo's benchmark Nikkei average, while Samsung Electronics shares fell 0.2%.

Global TV manufacturers are restructuring their businesses and outsourcing production as cutthroat competition and weak demand squeeze margins.

Analysts have criticized Sony for failing to aggressively meet stiff competition in the TV market from South Korean rivals Samsung, the world's No.1 TV maker, and LG Electronics Inc.