Even though gadgets are expected to be a hot item this holiday season, electronics manufacturers are getting gloomy on their next quarter. As profits sink, tech leaders are wondering when they’ll rebound.
Digital Journal — The Grinch came early to electronics giants this year. Quarterly earnings are down across the board, and even the most successful companies are posting less hopeful outlooks on the next few months. No one is immune from the economic downturn.
Canon announced a 21 per cent decrease in net profit for the third quarter, and its net sales were down 6.2 per cent compared to a year earlier. It lowered its full-year outlook to 375 billion, down from the 500 billion yen profit it predicted in July. Blame a falloff in prices for gadgets such as compact cameras, which face intense competition at home and abroad.
Canon isn’t alone. Japan’s Sony cut its annual operating profit forecast by 57 per cent, it’s profit has plummeted 72 per cent, and Panasonic posted a 19 per cent fall in quarterly profit. All Japan-based companies partly blame the strong yen for the economic headache — a higher yen hurts companies like Sony by making Japanese products more expensive abroad and reducing the value of overseas profits when converted into yen. Also, when the yen climbs, the Japanese stock market worsens.
It comes as no surprise, then, that electronics manufacturers are slashing prices for this coming holiday season. When consumer confidence hits an all-time low, swift action is seen as the best defense. Entry level Blu-ray players are now available at major retailers for $230, a sharp drop from the $400 asking price a year ago. In September, Microsoft announced the Xbox 360 would be available for $199; it launched three years ago at $400. And industry watchers predict LCD TV prices would slide significantly, prompting retailers to recoup the losses by pressuring customers to buy add-ons like high-margin extended warranties and installation services.
The gloomy financial quarter (and the subsequent somber outlook) is bruising these electronics companies, but how will it affect the hurting customer? As much as individual portfolios are suffering, there’s an upside this coming shopping season — savvy shoppers might be able to haggle more effectively with retailers over high prices. It’s a tiny silver lining in the grey clouds, but at least it’s something.
