Panasonic Corp is likely to forecast a record net annual loss of more than $9.2 billion (5.8 billion pounds), local media reported on Friday, as it tallies the cost of trying to fix its broken TV unit and writes down its Sanyo Electric acquisition, forming a trinity of beleaguered Japanese consumer electronic giants.
Panasonic's grim outlook follows forecasts from rival Sony Corp and Sharp Corp for combined losses of $6.7 billion, highlighting the impact that grinding competition from foreign rivals such as South Korea's Samsung Electronics and weak demand is having on Japanese TV makers wincing from 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 wider 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.
A bid by Sanyo to revamp its TV unit will account for around half of an expected 514 billion yen (4.26 billion pounds) restructuring bill at Panasonic this business year that will see the company shed 17,000 jobs by end-March.
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 the CES consumer electronics show in Las Vegas 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. 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 percent to $92 billion. Even worse, plasma sets, a market that Panasonic dominates, will shrink 38 percent to $7 billion.
If Panasonic's market share keeps shrinking by 10 percent 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 had finished touting his restructuring efforts in Las Vegas.
They don't seem like a company that's progressing towards a particular goal, said Yuuki Sakurai, CEO and president of Fukoku Capital, which managed assets worth $7.6 billion as of last March. It's hard to see how they will make up for the resources and time they have lost in the TV business.
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. Maybe there is no answer. Perhaps they're going to try various things and see if one of them works.
Panasonic shares initially fell on Friday, extending the previous day's slide to their lowest in more than 30 years. The stock later rebounded to close up 1.2 percent at 599 yen.
Some analysts are really worried about the possible write off of Sanyo's goodwill, said Nomura's Mikoshiba. On its balance sheet, Sanyo's goodwill comes to 900 billion yen. That's really, really big and we know the situation of the battery business is really, really terrible.
The Sanyo buy last year was part of a strategy to focus Panasonic more on doing business with other businesses in areas such as car parts and green technologies rather than selling goods to more fickle consumers.
Panasonic makes everthing from refrigerators and bicycle pumps to fax machines, turntables, light bulbs, and nose hair trimmers. Its most profitable business currently is white goods, including fridges and washing machines.
Sony on Thursday said Kazuo Hirai will succeed Howard Stringer as CEO in April, sparking an 8.1 percent jump in its share price on Friday, its biggest one-day gain in almost 11 months.
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.
In Las Vegas, at his last media appearance, he said he would consider what was most important for Panasonic, without saying whether that meant he would stick around.
Ohtsubo will hold a news conference at 5 p.m. (0800 GMT), following the release of Panasonic's quarterly results.
The Mainichi newspaper said Panasonic still expected to post an operating profit for the year. Analysts polled by Thomson Reuters I/B/E/S have on average forecast an annual operating profit of just over 100 billion yen, compared with Panasonic's last forecast of 130 billion yen.
In November, Panasonic warned of a 420 billion yen annual net loss, revising a previous forecast of a 30 billion yen profit, to cover its restructuring.
(Additional reporting by Taiga Uranaka; Editing by Edmund Klamann, Ed Davies and Ian Geoghegan)