Business

Sony mulling pulling out of LCD JV with Samsung, say sources

TOKYO, Oct 30 — Sony Corp, struggling with a loss-making television business, is considering dissolving its LCD joint venture with South Korea’s Samsung Electronics in a bid to cut costs, sources familiar with the matter said today.

The Nikkei business daily, which reported the news earlier, said the Japanese electronics and entertainment giant was aiming to reach an agreement by the end of this year to sell its nearly 50 per cent stake in liquid-crystal display joint venture S-LCD to Samsung.

Sony needs to step up outsourcing to reduce procurement costs and cope with rapidly declining prices of LCD panels due to a global oversupply.

Industry sources told Reuters in Tokyo that Sony hoped to dissolve the joint venture quickly, but that it had yet to agree terms or timing with Samsung.

Spokesmen for both Sony and Samsung Electronics declined to comment.

South Korean newspaper Chosun Ilbo had a similar report on the joint venture breakup in July, which Sony denied.

A well-informed industry source told Reuters in Seoul that such reports seem to be “distorted” because Sony has been negotiating with Samsung over its return on investment in the joint venture, rather than shareholdings.

“Under the contract on the LCD joint venture, the two parties are allowed to discuss such matters, which outsiders could misunderstand as a step for Sony to withdraw from the joint venture,” said the source, who spoke on condition of anonymity.

In April, the two companies cut capital in the joint venture by US$555 million (RM1.7 billion) as Sony sought to slash its TV losses and Samsung pushed ahead with next generation displays. .

Sony is under pressure to show it can reduce its exposure to the loss-making TV unit and concentrate on developing its strategy for smartphones.

Last week, it announced it will take control of its mobile phone joint venture with Ericsson as it seeks to exploit its music and video applications to help it catch smartphone leaders such as Apple Inc.

Sony reports July-September results on Wednesday. Analysts are forecasting Sony will fall short of its operating profit outlook of 200 billion yen for the year to March 2012, with consumer confidence wobbling in Europe and the United States and as the strong yen bites into profits.

The electronics giant, which competes with Samsung and LG Electronics in televisions, needs to slash costs as it heads for its eighth straight annual loss in its TV business.

Sony has already sold off TV factories in Spain, Slovakia and Mexico in the past few years and outsources more than half of production to companies including Hon Hai Precision Industry. It retains four TV plants of its own in Japan, Brazil, China and Malaysia. — Reuters

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