Posted by: Kenji Hall on September 14, 2007
That’s a key question that many observers will be asking if Sanyo Electric sells its cellphone business to Kyocera, as the Japanese financial daily Nikkei reports today. The sale would be crucial for Sanyo, which is struggling to make money in the hypercompetitive consumer electronics market. (In a statement, Sanyo said it would sell its mobile phone retailer business but had made no decision about the handset manufacturing part. “Sanyo is considering all possibilities for development and growth…It is not a fact that SANYO has made a decision to sell this business.)
The company’s cellphone business has been a major drag on earnings in recent years and tops the list of businesses that are expected to be put on the block by Sanyo’s creditors—Goldman Sachs, Sumitomo Mitsui Banking and Daiwa Securities. Those lenders threw the company a lifeline in early 2006 and are pushing, through directors they have on the board, their own ideas about how to turn the company around.
Sanyo’s troubles are an extreme example of what every Japanese electronics maker is facing. Most would be better off teaming up with rivals to achieve the economies of scale needed to be taken seriously on the global stage. I touched on this in a May 7 BW magazine story about former Deutsche Bank analyst Fumiaki Sato’s tough-love prescription for Japan’s tech companies.
Despite the problems with Sanyo’s cellphone making business, its handsets are top-class. Its main channels are through Japanese wireless companies and Sprint Nextel Corp. in the U.S., where more than half of global sales go. Kyocera not only would inherit the Sprint Nextel business, it would also expand the business in Japan, where it’s ranked eighth and has just 5% of the market. (Sanyo is seventh with 7.6%, according to MM Research Institute.) It sounds like a win-win situation for both—and for Japan’s cellphone making industry overall.