Monday, December 26, 2011

Samsung takes over Sony's stake in LCD venture


I just read this story in www.bbc.co.uk and I suppose the takeover is not that surprising given that Sony has not been performing that well while Samsung has been growing by leaps and bounds even during the global financial crisis that began in 2008.




Samsung Electronics has agreed to buy out Sony's entire stake in their liquid crystal display (LCD) joint venture.


The Korean electronics maker said it will pay Sony 1.08tn won ($939m; £600m) in cash for its stake.


The move comes as Sony has been restructuring its TV business, which has been making a loss for the past seven years.


Samsung, meanwhile, has gone on to become the world's largest maker of TVs and flat screen panels.


"Under the agreement, Samsung will acquire all of Sony's shares of S-LCD Corporation, the two companies' LCD panel manufacturing joint venture, making S-LCD a wholly owned subsidiary of Samsung," Samsung Electronics said in a statement.


The joint venture between two companies was established in 2004, when a boom in the global economy saw a surge in demand for consumer electronics.


However, things have take a dramatic turn in the last three years.


Triggered by the financial crisis in 2008, the subsequent global economic uncertainty has resulted in a slowdown in consumer demand.


At the same time, falling prices of LCD panels and flat screens have also hurt profit margins.


"In order to respond to such challenging conditions and to strengthen their respective market competitiveness, the two companies have agreed to shift to a new LCD panel business alliance," Samsung said.


Sony will continue to get LCD panels from Samsung based on prevailing market prices, without having to operate a manufacturing facility.


For its part, Samsung said the full ownership of the venture will give it "heightened flexibility, speed and efficiency in both panel production and business operations".


Analysts said the deal was the right move, especially for Sony.


"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."

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