IBARAKI, Japan Panasonic Corp's (6752.T) display business is on track for its first profit in five years in January-March, driven by stronger sales of liquid crystal display (LCD) panels for tablets and PCs, the head of the division said in an interview on Thursday.
As Panasonic draws back from money-losing TVs - it makes the Viera TV brand - it's looking to boost sales of smaller LCD panels used in tablets and mobile phones, a strategy also being pursued by rival Sharp Corp (6753.T).
Panasonic, Sharp and Sony Corp (6758.T) have been battered by declining TV sales and a strong yen that makes their products look expensive when lined up against innovative designs from South Korean competitors and others. Panasonic has warned it will lose close to $10 billion this year as it writes off tax deferred assets and goodwill across businesses and prepares for a restructuring. Finance chief Hideaki Kawai told Reuters on Wednesday that a fifth of Panasonic's 88 business units are losing money and only half meet a 5 percent operating margin target.
Small LCD panels will likely make up around 60 percent of the unit's sales in the six months to March, double their first-half contribution, Yoshio Ito told Reuters.
"We are now making displays for more than 10 models of tablets and PCs," he said in an interview at a former factory in Ibaraki in western Japan, once the hub of TV production and now his headquarters and a research and development centre.
Making money again from LCD panels will help cover continued losses from plasma displays, which are difficult to make in smaller sizes, Ito said, adding the plasma part of the business would still lose money in January-March.
"It's a very bullish target," said Yasuo Nakane, an analyst at Deutsche Securities in Tokyo, in reaction to the LCD profit pledge.
GRAPHIC: Panasonic earnings r.reuters.com/xyw63t
Ito and other Panasonic managers are under pressure from new company president Kazuhiro Tsuga to raise their game. Tsuga has said that any division failing to hit at least the 5 percent operating margin target within three years will be shut or sold. From April, Tsuga will begin weeding out the weakest among Panasonic's businesses - which churn out a vast range of goods from fridges and shavers to solar panels and batteries.
The success of tablets from Apple Inc's iPad (AAPL.O) and Samsung Electronics' (005930.KS) Tab to more recent offerings from Google Inc (GOOG.O), Amazon.Com Inc (AMZN.O) and Microsoft Corp (MSFT.O) has created room for Panasonic's display business to decouple from TVs.
The global tablet market should double this year to 113 million, industry research firm Gartner estimates, and will top 300 million by 2016.
Sharp, which sold most of its advanced Sakai LCD plant, which makes TV panels, to Taiwan's Hon Hai Precision Industry Co Ltd (2317.TW) and converted another, at Kameyama, to making smaller displays, is fighting in the same space, supplying Apple with screens for the iPad and iPhone 5.
Sony, instead, is focusing on building its smartphone, camera and game console division while nurturing new ventures such as medical equipment.
Panasonic's audiovisual division, which includes Ito's panel business, lost 2.1 billion yen in July-September as sales fell 7 percent from a year earlier. For the full year, the unit cut its operating profit forecast to 36 billion yen from a previous 121 billion yen.
Panasonic shares, which have been trading around multi-decade lows, closed up 1.8 percent on Thursday at 395 yen.
(Editing by Michael Watson and Ian Geoghegan)
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