Panasonic Corporation (ADR)(OTCMKTS:PCRFY) (TYO:6752), bewildered by the losses and laid back response, has decided on retiring from Japanese smartphone market, and slash down its production in emerging markets like India. Panasonic posted a loss of $15 billion in its recent two financial years and has decided to transform itself from a consumer gadget making company to a supplier for other business.
Closing smartphone business part of turnaround plan
Panasonic President, Kazuhiro Tsuga is the one responsible for turnaround plan for Panasonic. Tsuga has declared that he will shutter any division that lags behind the target of 5 percent operating margin goal within three years.
In an interview to Reuters, Tsuga stated that company’s mobile division is estimated to lose more than 1.1 billion yen for the financial year ending next March. The division reported a loss of 8.1 billion yen in the previous fiscal.
“It’s not acceptable for the company to be bleeding red ink like this, so we have to think about ways to develop assets that we do have in a more effective direction,” Tsuga said.
According to Tsuga, Panasonic will discontinue manufacturing and selling its own phone under a vertically integrated business model. It will take brand advantage of the company to sell phones made by other manufacturers, which the company is already practicing in India.
Though Panasonic Corporation (ADR)(OTCMKTS:PCRFY)(TYO:6752) is pulling itself from consumer smartphone market, but the company is focused on coming up with the smartphone for business, which will have similar features of popular “Toughbook” notebook PC series.
Panasonic was once a dominating force in Japanese market
Consumer preferences in Japan have shifted to a great extent from once highly customized feature phones made by Panasonic, NEC Corp and Fujitsu Ltd to iPhones and Samsung Galaxy series.
Back in 2001, Panasonic held a staggering 19 percent of market share behind to NEC. In sharp contrast to 2001, last year, the Japanese smartphone maker had only 7 percent share, which lagged considerably behind Apple’s 25 percent market share.
Apple, Samsung to blame
Panasonic, like a host of other smartphone makers, has been overshadowed by the sparkling rise of Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), which have revolutionized the hierarchy of smartphone companies.
Panasonic was severely hit by the decision of Japan’s biggest mobile carrier NTT DoCoMo Inc, which declared that it will promote only Sony Corp’s flagship Xperia smartphone and the Samsung Galaxy during its summer campaign ceasing its loyalty for Panasonic.
Earlier in July, NEC declared that it will sell its handset business to Lenovo Corp and will move out of smartphone business.