Canon Names Successor to Mitarai, Boosts Dividend and Readies to Compete Against LCD and Plasma TVs (CAJ)

Includes: CAJ, MC-OLD, SNE
by: Steven Towns

Three big pieces of news were associated with Canon's (CAJ) Q4 2005 earnings. One of the three is a guaranteed benefit to shareholders, that its full year dividend was increased from 65 yen to 100 yen per share ($0.85) nearly a 54% increase. That should assuage any investor concern related to the stepping down of much respected CEO Fujio Mitarai, who will leave Canon in May to run the powerful Keidanren (The Japan Business Federation) lobby. The new CEO will be Tsuneji Uchida, who was just promoted to senior VP. He will head the firm as it aims to expand into the competitive thin panel TV panel business.

It's the last item that concerns me most even though Canon will be jointly developing the screens with Toshiba. Canon is said to be developing a superior technology that produces clearer resolution and consumes less energy than competing LCD and plasma models. Japanese CE firms such as Matsushita (MC), Sharp, and Sony (SNE) have been very aggressive in ramping up production capacity of thin screen panels eyeing unmet and rising demand for the foreseeable future. My two concerns are the high capital requirements and the price erosion underway as manufacturers must continually lower prices in order to boost sales and remain competitive.

Investors in both the US and Japan reacted mildly to Canon's earnings and news, even despite its bullish forecast going forward. Canon's ADRs (NYSE:CAJ) were down .68% or $0.42 yesterday. Canon's shares traded in Japan (ticker: 7751) were down 1.53% today after it released earnings yesterday after market.

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