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Hitachi’s profits rise after turning off TV

– Hitachi is showing Sony and Panasonic that there can be life after television.

The company ended 56 years of TV manufacturing in August as part of a turnaround from a record loss three years ago. President Hiroaki Nakanishi, a 42-year company veteran, has also shed units making liquid-crystal displays and hard drives while seeking annual cost cuts of some 450 billion yen, or $5.7 billion.

Outsourcing TV production let Hitachi escape rising South Korean competition and slumping prices that have hit Panasonic, Sony and Sharp with growing losses. I

Instead, the 102-year-old manufacturer is benefiting from demand for power stations in India, high-speed trains in Europe and auto parts in China.

“Hitachi’s decision came just in time,” said Masayuki Kubota, who first covered the Tokyo company as an analyst in the 1980s and now holds its stock among the $1.9 billion of assets he manages at Daiwa SB Investments.

“Japan has lost its competitive edge in consumer electronics.”

Sharp, Sony and Panasonic have each slumped more than 73 percent in Tokyo trading since April 2010, when Nakanishi took over at Hitachi. His company has risen 17 percent, boosting its market value to $24 billion – almost as much as the three consumer electronics makers combined.

Hitachi’s array of industrial products such as construction equipment, software and escalators has made it easier for it to shed TV operations than it would be for rivals. Its consumer products division accounted for 8.3 percent of sales in the quarter ended September, down from 12 percent four years earlier. Sony, Sharp and Panasonic get more than two-thirds of their sales from electronics, giving them fewer alternatives for boosting revenue.

“It would be particularly difficult for Panasonic and Sharp to stop making televisions,” said Ichiro Michikoshi, an analyst at BCN Inc.

Nonetheless, Hitachi should be an example for other companies in the country as they consider what to do about loss-making operations, said Atsushi Osanai, a Sony veteran now working as an associate professor at Waseda University’s business school.

“Many Japanese companies tend to hold onto businesses even if they aren’t profitable,” he said.

“They could learn a lot from Hitachi.”

Hitachi’s investment areas include cloud computing and smart cities, and it’s aiming to cut costs 5 percent through greater cooperation among its 900 or so units in purchasing, production and back-office functions.

The company is also emphasizing growth in emerging markets to reduce its reliance on Japan’s shrinking population.

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