Plasma TV Takes Pioneer Down

Pioneer Electronics has blamed the crash of the plasma TV market for year-end losses. The news comes only days after the company launched what has been described as the best flat screen TV in the world.

Despite a delay of several weeks in announcing its financial results, Pioneer Electronics has been hit hard by the massive downturn in demand for plasma TVs. Last night, the company announced a loss of more than $67 million for the past business year after writing down its plasma TV operations. In an effort to help it restrucure its operations, the company has announced that it would make Tohoku Pioneer a wholly-owned subsidary.

While Pioneer has witnessed brisk demand for its car navigation systems, its plasma TV operations has struggled to compete with larger rivals such as Panasonic. Also impacting the company is the lack of an LCD TV offering, a move which the local Pioneer Electronics subsidiary in Australia was denied. It planned to source an OEM LCD TV and brand it Pioneer, but the move was stopped by Pioneer executives in Japan.

The company posted a net loss of $56.3 million for the year ended March 31, missing its forecast for a profit of 5 billion yen and the market consensus for a 4.5 billion yen profit in a poll of 15 analysts by Reuters Estimates.

Pioneer attributed its third straight annual loss to a write down of its plasma TV operations. On an operating basis, it swung to a profit of 12.5 billion yen, helped by a robust showing in car electronics and a weaker yen.

For the year that started in April it aims to return to the black with a net profit of 12.5 billion yen. That is higher than the consensus of 7.16 billion yen. To help with its restructuring, Pioneer said it would launch a 14.76 billion yen bid for the 23 percent it does not already own in Tohoku Pioneer, which makes car-mounting speakers and organic EL (electroluminescence) displays for mobile devices. “As we plan to overhaul our businesses, it would be easier for us to pursue restructuring if Tohoku Pioneer becomes a fully owned unit,” said a Pioneer spokeswoman, adding that the deal would be financed with cash on hand.

The bid, which starts on Tuesday and ends on June 19, could help Pioneer improve its cost structure, one fund manager said.

“Pioneer’s technological competitiveness is highly evaluated among investors but the company has not been able to cut costs and transform its know-how into a hit product,” said Masayuki Kubota, a fund manager at Daiwa SB Investments.

“Investors will pay attention to the tender offer to see if it leads to any significant cost reduction.”

In recent days Pioneer has announced what many media organisations are describing as the world’s best plasma TV. It has also announced the move of its marketing and advertising to Chiat Day, the advertising agency for the Apple iPod. The move is seen as an effort by the company to consolidate its brand image while also building the image of plasma up alongside  LCD TV.