Summary
Sony, Panasonic, Pioneer, Toshiba, JVC, Kenwood, and NEC are all venerable consumer electronics brands, but unless there are dramatic shake-ups in the way they manage their businesses, their glory days may be forever gone. Competition from Korean companies like Samsung and LG and a myriad of competitors from Taiwan, China and other Southeast Asian countries are part of the problem. Movement away from many of their core products in audio and video to iPods and other MP3 players, on the one hand, and to flat screen TVs, on the other, is another.Perhaps more important, however, is the same problem that has plagued U.S. auto manufacturers. They have entrenched middle market bureaucracies and very high operating costs, partially a product of their life-time employment philosophy—not unlike the power of U.S. unions. Even though they may own manufacturing plants in low labor cost countries or have the best purchasing power of any buyer, they are burdened with too much burden.
Analysis
Large and well diversified companies like Sony and Matshushita (Panasonic and National) should continue to plod along nicely. I would not expect any dramatic earnings swings. The smaller, less well diversified companies like Pioneer, Kenwood, Toshiba, and others will likely continue to struggle. I think the key to their return to strong growth will be to invest in new technology companies that are not integrated in to their parent companies and spinning off entrepreneurial skunk works that are not burdened with legacy issues.
