Sony Corp, struggling with a loss-making television business, is in negotiations to pull out of its LCD joint venture with South Korea's Samsung Electronics in a bid to cut costs, the Nikkei business daily reported on Sunday.
The Japanese electronics and entertainment giant is aiming to reach an agreement by the end of this year to sell its nearly 50 percent stake in liquid-crystal display joint venture S-LCD to Samsung, the paper said. Sony intends to rely more on outsourcing to reduce procurement costs to cope with rapidly declining prices of LCD panels due to a global oversupply, the Nikkei said without citing sources.
A Samsung Electronics spokesman declined to comment and Sony officials were not reachable immediately. 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 $555 million 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 ($2.63 billion) 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.