Panasonic Corp posted a larger-than-expected 5.6 percent fall in quarterly profit on Wednesday as tough price competition in TVs and a stronger yen offset help from Japan's incentive scheme.

Panasonic, the world's fourth-largest television maker after Samsung Electronics, LG Electronics and Sony Corp , is struggling to catch up in smartphones and tablets, a market dominated by Apple Inc and with Samsung emerging as a key rival.

From October onwards, we faced substantial price falls (for TV sets) all over the world, with competition from Samsung and LG, Managing Director Makoto Uenoyama told a news conference, adding that the TV business made a loss in October-December.

Investors are eyeing Panasonic's ability to restructure quickly and show benefits after its buyout of subsidiary Sanyo Electric, which is aimed at sharpening the company's focus on environmental technologies such as solar power systems and rechargeable batteries.

The company is expected to provide an update on integration plans later this year.

It's difficult to evaluate earnings for Panasonic as the company is still in a phase of transition after its buyout of Sanyo Electric, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

Its long-term strategy is firm as Panasonic will focus more on batteries, but it looks hard for Panasonic to make big profits as its business is still weighed heavily in consumer electronics, he said, adding that heated competition in the flat-TV business is hitting all players.

Panasonic reported an operating profit of 95.36 billion yen ($1.17 billion) for October-December, lagging the average forecast of 109.1 billion yen from a poll of six analysts by Thomson Reuters I/B/E/S.

Japanese consumers rushed to buy home appliances and electronics in November, ahead of cutbacks to a government incentive scheme that is aimed at encouraging them to buy environment-friendly goods.

The maker of Viera TVs and Lumix cameras left its full-year profit outlook at 310 billion yen, compared with the consensus of 328 billion yen in a poll of 20 analysts. Operating profit for the year to March 2010 was 190 billion yen.

Panasonic shares have fallen nearly 30 percent from a 14-month high of 1,585 yen reached in January last year, compared with a 5 percent fall in the Nikkei average.

(Additional reporting by Chikafumi Hodo; Editing by Michael Watson and Vinu Pilakkot)

Japan Manufacturing