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Mon 26 Dec 2011 05:07 PM

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Sony to sell stake in LCD venture to Samsung for $940m

Japanese electronics giant is struggling to curb losses amid low demand for TVs, surging yen

Sony to sell stake in LCD venture to Samsung for $940m
Some analysts say the $100bn LCD TV market peaked last year (image for illustrative purposes only)

Sony Corp has agreed to sell its nearly 50 percent stake in an LCD joint venture with Samsung Electronics to Samsung for $940m, the Korean firm said on Monday, as Sony struggles to staunch red ink at its TV business.

The venture cut its capital by 15 percent in July and industry sources had said Sony was negotiating an exit, aiming to switch to cheaper outsourcing for flat screens for its TVs while Samsung pushes ahead with next-generation displays.

Sony warned in November of a fourth straight year of losses for the financial year to next March, with its TV unit alone set to lose $2.2bn on tumbling demand and a surging yen.

The maker of Bravia TVs and PlayStation game consoles said at the time it would revamp its LCD panel procurement but did not comment on the outlook for the LCD venture with Samsung.

"In terms of direction it is positive," said Keita Wakabayashi, an analyst at Mito Securities in Tokyo. "But if they are making a loss on the sale, one could ask why they didn't make this decision sooner."

Some analysts say the $100bn LCD TV market peaked last year and forecast it will shrink 3 to 4 percent annually, as consumers in advanced countries have already traded in their bulky cathode-ray tube TV sets for flat screens, while the LCD market has been in a glut since last summer.

Sony said in April it would not raise its stake in a separate LCD venture with Sharp Corp for at least a year, and in October signaled a stepped-up push into the smart phone market by announcing it would take control of its mobile phone joint venture with Ericsson for $1.5bn.

The company is hoping to exploit its music and video applications to help it catch up with smartphone leaders such as Apple Inc.

Sony said on Monday it would report a 66 billion yen ($856m) impairment loss for the October-December quarter but expected to cut 50 billion yen in annual costs in the LCD business by ending the venture with Samsung.

Sony holds a nearly 50 percent stake in the venture, S-LCD, which was established in April 2004 to secure stable supplies for Sony's flat-screen TVs.

Shares in Sony ended 1.6 percent higher, compared with a 1 percent gain in Tokyo's benchmark Nikkei average, while Samsung Electronics shares fell 0.2 percent.

Global TV manufacturers are restructuring their businesses and outsourcing production as cutthroat competition and weak demand squeeze margins.

Analysts have criticised Sony for failing to aggressively meet stiff competition in the TV market from South Korean rivals Samsung, the world's No.1 TV maker, and LG Electronics Inc.

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Andy 7 years ago

Samsung is sneaky. HTC uses Sony's S-LCD for their devices and HTC is Samsung's biggest competitor for the Smartphones. Samsung was thinking that if they could control pricing on the S-LCD to the point to where cost would become higher than their then they would have an edge in selling their Samsung Smartphones over the HTC ones. Samsung is a very sneaky company. Many Arab consumers buy Samsung products but if they had only been to South Korea to see how the government makes it almost impossible to import foreign products into their country because they want the locals to only buy their own products and because the locals are so patriotic and nationalists they pretty much only buy their own products and boycott all foreign made products.

Many of the Arabs though don't understand or know this as most of their products are imported. In Asia many people that know the Koreans refuse to buy their products because of this.

Just think about it. Samsung makes their own displays so why buy?