Seeking Alpha
Research analyst, newsletter provider, Japanese micro & smaller caps, value
Profile| Send Message|
( followers)  
Sony Ericsson posted solid quarterly numbers again, nearly doubling y-o-y net income. And the LCD panel manufacturing joint venture between Sony-Samsung known as S-LCD Corp seems to be doing quite well itself as the two sides just signed a contract for construction of its 8th generation LCD panels expanding into the 50 inch class. Despite the successes of its joint ventures Sony's challenges and struggles will continue to persist due to its size and breadth of product lines.

Even for larger rival Samsung which took the world by storm in the first half of this decade, the playing field is extremely competitive and not only is it hard to outperform against falling prices in key segments but it's also hard to please investors when you get to be so big in market capitalization.

In some instances forming joint ventures and sharing in capital investment, risks, and of course profits has been advantageous. However, for conglomerates such as Sony and Samsung, a resulting positive impact on share price is usually limited.

Investing in a conglomerate can be a good idea in down markets since larger firms might be better capable of weathering the storm and attracting investors based on higher dividend yields and a sense of security given its size. That being said, I actually see more upside and limited downside investing in more specialized manufacturing firms in consumer electronics as opposed to going after the big boys. For instance, two Japanese ADRs that might be worth considering at current levels are Nidec Corp (NYSE:NJ) and TDK Corp (TDK).

Sony Corp (NYSE:SNE) 1-year chart:

Nidec Corp (NJ) 1-year chart:

TDK Corp (TDK) 1-year chart:

Source: Sony JVs Working but No Panacea; More Upside in Specialized Manufacturers? (SNE, NJ, TDK)