Sony Walkman Production to be Shifted 100% Overseas (SNE, AAPL)

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

Tokyo (NYSE:AP) and a handful of other news sources are reporting Sony (SNE) will stop making its once signature product, the Walkman, in Japan. Production will reportedly be shifted to Malaysia and China. I applaud Sony for this move because symbolism means almost nothing in competition, especially when its biggest rival Apple (AAPL) has such a commanding share of the portable digital music player market with its iPods.

Under its three-year business plan through fiscal 2007 that ends in March 2008, Sony is seeking to reduce the number of its global manufacturing bases by 11 from 65 at the end of March 2005. Sony's July-September group net profit plunged 46 percent to 28.5 billion yen ($249 million). (source: Tokyo (AP))

With 3rd-quarter earnings due this week, Nathan Layne of Reuters-Tokyo reported the following on Sony in an article entitled, "Sony seen hiking forecast."

Matsushita Electric Industrial Co. Ltd. (ticker: MC, Tokyo Stock Exchange: 6752) and Sony Corp. (ticker: SNE, Tokyo Stock Exchange: 6758) are expected to grab the spotlight when Japan's top consumer electronics makers report quarterly earnings starting this week by raising their full-year outlooks on the back of strong sales of flat screen TVs.

Sony, the world's second-largest consumer electronics maker after Matsushita, is seen recording a 33 percent drop in operating profit for the third quarter, reflecting soft sales of semiconductors and charges for a sweeping restructuring plan.

But market participants are most keen to see how significant any full-year revision is from Sony, whose ailing electronics division is thought to have benefitted from big market share gains in the LCD TV market and strong camcorder sales.

Another boon came from Japan's stock market rally, which boosted profits in Sony's financial division, analysts said. A softer yen should also help as Sony, like most Japanese consumer electronics makers, gets the bulk of its revenues abroad.

"I expect Sony and Matsushita to revise up. Sony's revision could be quite large," said UBS analyst Fumio Osanai, who estimates a group operating profit of 78.5 billion yen for the year to March versus Sony's forecast of a 20 billion yen loss.

In other Sony related news, Sony will be receiving certain digital SLR camera related assets from Konica Minolta as the latter exits the camera business after 130 years. Konica Minolta's exit appears to be great news for Sony as it will have one less competitor and also be able to break into the SLR segment.

Sony reports Q3-05 earnings this Thursday. Check back after its earnings release for a free transcript of Sony's conference call provided by Seeking Alpha.

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