Business Restructuring Plans
March 07 2008 - 1:52AM
UK Regulatory
RNS Number:5917P
Pioneer Corporation
07 March 2008
For Immediate Release
March 7, 2008
Pioneer Announces Restructuring Plans for
its Display Business and Measures to Enhance Corporate Value
TOKYO - Pioneer Corporation has announced that at a meeting of its Board
of Directors held today, the Company resolved to restructure its display
business and implement measures to enhance corporate value, as follows.
I. Restructuring Plans for the Display Business
Displays are positioned at the heart of Pioneer's home audio/video
product lineup and help to enhance the image of the Company's brands in
the Home Electronics business. Pioneer believes that displays are indispensable
to its product lineup for these reasons and will therefore maintain its
fundamental strategy for the display business - supply premium models with
high picture and sound quality befitting the image of its brands at prices
matching their added value, while optimizing the scale of its business.
However, we have judged that maintaining the cost competitiveness of
plasma display panels at projected sales volumes will be difficult going
forward. Accordingly, we have decided to terminate in-house plasma display panel
production and to procure these panels externally, after panel production for
our next series of models is complete. This move will allow us to transform our
business model for displays from vertically integrated, capital-intensive
operations to a leaner business model geared to making value-added product
proposals. Pioneer is currently in discussions on the feasibility of procuring
panel modules that may incorporate the Company's proprietary
technologies. Details will be announced as soon as they are finalized.
Pioneer plans to review its production structure in conjunction with the
termination of plasma display panel production and to streamline the entire
display business to a scale commensurate with sales. We aim to compensate for
cutbacks in the plasma display business by driving further expansion in our
growth businesses. This will be done by shifting related personnel and other
business resources to the Car Electronics business; the professional sound &
visual (Pro SV) business, which involves DJ equipment; and the audio/video
product business, including Blu-ray Disc-related products. We will give
consideration to retaining employees in the course of this process.
Details are currently under review and will be announced as soon as they are
finalized.
In fiscal 2008, the year ending March 31, 2008, Pioneer will book an
impairment loss on plasma display production facilities. In fiscal 2009, we will
streamline the plasma display business and shift resources to our growth
businesses. However, these measures are not expected to produce significant
benefits until fiscal 2010. Nevertheless, we believe that these measures will
help to restore profitability in the Home Electronics business in fiscal 2010.
II. Measures to Enhance Corporate Value
1. Growth Strategies for the Car Electronics Business
Pioneer's top priority for maintaining its current level of
profitability in the Car Electronics business is to grow the car navigation
system business.
First, Pioneer will bolster telematics functions, which employ mobile
phones and the Internet and are expected to become mainstream in the car
navigation system field going forward. This is part of efforts to transform car
navigation systems into comprehensive in-vehicle information terminals offering
much more than merely car navigation in a bid to stimulate new demand. Another
goal is to counter growing demand for portable navigation devices. Here, Pioneer
will expand its customer base for in-dash car navigation systems by proposing
new forms of value not offered by portable navigation devices. For instance,
Pioneer is developing new in-dash car navigation systems with built-in audio/
video functions that feature connectivity with peripheral electronics and
innovative device operability. We are developing a "light" platform that will
support the worldwide launch of these new models.
In OEM car navigation systems, we will concentrate on winning contracts
for assembly line products worldwide for automakers. At the same time, we will
grow business in the domestic dealer options market. Through these measures,
Pioneer aims to expand the scope of its car navigation system business as a
whole.
In car audio/video products for consumer markets, we will compensate for
contraction in developed countries' consumer markets by actively
responding to rapid market expansion in the BRICs nations. Concurrently, we plan
to maintain profitability and mitigate any decrease in unit prices by shifting
our center of gravity from models equipped with CD players to those with DVD
players. We also aim to maintain our market share by vigorously offering new
value propositions that cater to various forms of media and networks.
On the development front, Pioneer will work to boost efficiency by
implementing reforms of increasingly complex software development processes and
by adopting common platforms for OEM products for which orders are growing.
These and other measures will help us to maintain profitability as we grow our
business.
Through these and other initiatives, we aim to maintain an operating
margin of around 6% to 7% in the Car Electronics business over the medium term.
2. Restoring Profitability in the Home Electronics Business
In the Home Electronics business, Pioneer is focused on improving profitability
by expanding sales of audio/video products linked with displays and by growing
sales of Blu-ray Disc-related products.
Pioneer will reinforce its range of network and wireless-compatible
audio/video products linked with displays. Our goal is to create home
environments where people can freely manipulate digital content piped into their
homes over networks. We also aim to develop displays that are next-generation
wall-mountable TVs by wirelessly connecting displays and various source devices.
Pioneer also aims to expand business by incorporating new value proposals into
each new product-proposals based on video and audio analysis
technologies cultivated through extensive research into high picture and sound
quality.
With regards to Blu-ray Disc-related products, Pioneer will concentrate
internal product development on Blu-ray Disc players, which are expected to find
growing adoption worldwide. Meanwhile, we will use joint development and
outsourcing to enhance our lineup of Blu-ray Disc recorders and other products.
Furthermore, we aim to grow external sales of Blu-ray Disc devices through
package sales that combine such devices with platforms for Blu-ray Disc players
and recorders.
In the Pro SV business, Pioneer will drive even greater business
expansion by augmenting its lineup of DJ equipment and moving into new
categories of video and audio equipment.
Through these initiatives and the aforementioned restructuring plans for
the display business, Pioneer aims to improve profitability in the Home
Electronics business, moving it back into the black in fiscal 2010.
3. Strategy for the Speaker Business
The speaker business makes effective use of technologies and expertise
accumulated by Pioneer over its entire 70-year history. We are trying to expand
this business as a whole by focusing on growing not only the car speaker
business, where we boast a dominant market position, but also speakers for home
use.
In home-use speakers, we aim to ensure profitability while expanding
sales by supplying value-added products. Efforts will also focus on moving into
new product categories in business-use speakers.
Turning to speaker unit sales to external customers, Pioneer will work
to increase its external customer base to ensure consistent and stable growth in
speaker units for mobile phones. In fields such as speaker units for flat-panel
TVs, Pioneer will develop and boost sales of proprietary speaker units.
Reforming the operating structure is a priority, too. We will pursue
economies of scale by concentrating speaker development and production at Tohoku
Pioneer Corporation, which is now a wholly owned subsidiary of Pioneer
Corporation. We will also apply our expertise in home-use speakers to car
speakers. In this way, we hope to rapidly reap benefits from our business
integration with Tohoku Pioneer.
By working hard on these and other initiatives, we aim to grow our
speaker business roughly 1.5-fold over the medium term to become the world's
leading speaker manufacturer in terms of both quantity and quality.
4. Progress on Business Alliance with Sharp Corporation
As part of a comprehensive business and capital alliance formed by Pioneer and
Sharp Corporation in 2007, the two companies are conducting joint product
development by making effective use of each other's resources in their
respective fields of expertise. The overriding goal is to enhance the corporate
value of both companies.
In the field of flat-panel TVs, for example, Pioneer is taking part in
Sharp's development of acoustic systems for ultra-thin, flat-panel TVs.
By leveraging its acoustic technologies built up over many years, Pioneer aims
to develop acoustic systems employing ultra-thin speakers that still achieve
outstanding sound quality for supply to Sharp. Furthermore, Pioneer will be
supplied by Sharp with LCD TVs based on its superior technologies. We will
launch these LCD TVs first in Europe this fall and steadily expand our lineup of
LCD TVs. Plans also call for engineers from Pioneer and Sharp to team up to
develop LCD TVs that carry on the legacy of the Pioneer "KURO"
series in terms of high picture and sound quality. This project will give
Pioneer access to Sharp's extensive expertise in LCD TVs, while
promoting joint development of digital tuners, platforms and technologies for
realizing high picture quality. The goal is to develop value-added products and
raise the efficiency of development activities at both companies.
In the optical disc field, Pioneer and Sharp have agreed to join forces
to expand their respective Blu-ray Disc-related product businesses. This step
takes the alliance beyond merely supplying existing products such as DVD players
and DVD recorders to each other. Joint development of pickups and drives for
Blu-ray Disc players/recorders, will bolster the two companies'
vertically integrated business models spanning devices to end products. Cost
reductions resulting from more efficient development and volume growth will in
turn contribute to business expansion. Here too, Pioneer and Sharp are resolved
to build even stronger ties by efficiently conducting joint development.
In car electronics fields, Pioneer and Sharp plan to jointly develop
products based on Sharp's "only one device" concept. The
two companies will make a point of enhancing device operability to propose new
kinds of automotive passenger cabin environments. We also plan to propose new
forms of value by linking Sharp's AQUOS TM mobile phone concept
with our car navigation system technologies. We want to use these joint
development projects to drive further business expansion at both companies in
the car electronics field.
The concrete achievements of these initiatives will be showcased at
CEATEC JAPAN 2008 this fall and at various product presentations.
Note: "AQUOS" is a registered trademark of Sharp Corporation.
5. Outlook
Pioneer will make a group-wide effort to steadily implement structural reforms
of its display business, while expanding its Car Electronics business, improving
profitability in its Home Electronics business and growing the speaker business.
Our aim is to improve our operating results and ensure stable earnings growth.
Through the business alliance with Sharp, we will utilize each other's
resources and promote joint development in each of our businesses, in order to
develop new products and businesses and improve the efficiency of development
activities.
III. Revisions to Consolidated Business Forecasts for Fiscal 2008
In light of the aforementioned business restructuring plans, we have revised our
consolidated business forecasts for fiscal 2008, the year ending March 31, 2008,
which were announced on January 31, 2008, as follows:
(In millions of yen)
Revised Previous
forecasts forecasts
for fiscal 2008 for fiscal 2008 Changes Results
(A) (B) (A - B) for fiscal 2007
Operating revenue Y800,000 Y800,000 Y0 Y797,102
Operating income 10,000 10,000 0 12,487
Income (loss) before income
taxes 7,000 26,000 (19,000) (7,717)
Net income (loss) Y (15,000) Y 6,000 Y(21,000) Y (6,761)
There has been no change in our previous forecasts for operating revenue and
operating income.
We have lowered our previous forecast for income before income taxes based on an
estimated impairment loss of Y19,000 million on plasma display production
facilities in the Home Electronics business. In addition to this impairment
loss, we expect to incur an estimated increase of Y2,000 million in income taxes
accompanying evaluation of deferred tax assets. Accordingly, we have also
reduced our previous net income forecast.
Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this release with respect to our current plans, estimates,
strategies and beliefs, and other statements that are not historical facts are
forward-looking statements about our future performance. These statements are
based on management's assumptions and beliefs in light of the
information currently available to it. We caution that a number of important
risks and uncertainties could cause actual results to differ materially from
those discussed in the forward-looking statements, and therefore you should not
place undue reliance on them. It is not our obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. We disclaim any such obligation. Risks and uncertainties
that might affect us include, but are not limited to, (i) general economic
conditions in our markets, particularly levels of consumer spending; (ii)
exchange rates, particularly between the yen and the U.S. dollar, euro, and
other currencies in which we make significant sales or in which our assets and
liabilities are denominated; (iii) our ability to continue to design and develop
and win acceptance for our products and services, which are offered in highly
competitive markets characterized by continual new product introductions, rapid
developments in technology, severe price competition and subjective and changing
consumer preferences; (iv) our ability to successfully implement our business
strategies; (v) our ability to compete, as well as develop and implement
successful sales and distribution strategies, in light of technological
developments in and affecting our businesses; (vi) our continued ability to
devote sufficient resources to research and development, and capital
expenditures; (vii) our ability to continuously enhance our brand image; (viii)
the success of our joint ventures and alliances; (ix) the success of our
business restructuring plans; and (x) the outcome of contingencies.
Pioneer Corporation is a leading global manufacturer of consumer- and
business-use electronics products such as audio, video and car electronics. Its
shares are listed on the Tokyo Stock Exchange.
# # # # # #
For further information, please contact:
Investor Relations Department, Corporate Branding and Communications Division
Pioneer Corporation, Tokyo
Phone: +81-3-3495-6773 / Fax: +81-3-3495-4301
E-mail: pioneer_ir@post.pioneer.co.jp
IR Website: http://pioneer.jp/ir-e/
This information is provided by RNS
The company news service from the London Stock Exchange
END
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