In yet another sign of dramatic changes afoot that will literally change the face of the TECH industry for years to come – news comes out of Japan that Pioneer Corp. is planning to exit the AV business by selling off its entire AV division. This news follows a similar decision made by JVC Kenwood earlier this year to pull out of consumer electronics to focus on more commercial business.
Pioneer is said to be in active negotiations with Funai Electric, a large OEM manufacturer who recently took over Philips video business, as well as other potential suitors.
Does this deal make sense? Or has the AV world gone crazy?…
By divesting the AV division, Pioneer looks to focus its energies on its car electronics and other more profitable businesses. The primary reason for the divestiture is that the company sees the AV industry moving to more of a download environment and, therefore, hardware manufacturers face a shrinking market opportunity in this new world.
Negotiations are said to be taking place from multiple potential suitors through a variety of financial institutions. Among topics being discussed, according to a report by the Nikkei, is “the value of the company’s global brand” as well as an assessment of its production base and sales networks. The company expects to have a deal by July – only about 45 days away.
A major player…
Pioneer is a major player in the AV business, although with a declining role over the last few years by trend and by design. The company has a full range of products including home theater systems and Blu-ray disc players.
The AV division generated ¥108 billion ($1.04 billion) in fiscal 2013 globally. This equates to about 20% of the company’s overall revenues. The division is said to have generated about ¥100 million in operating profits for the company.
From sewing machines to TVs…
Founded in 1951, Funai started as a sewing machine manufacturer that grew into a large and diversified manufacturer of consumer electronics products. For many years, they existed as a OEM manufacturer – making products for other companies to sell under their own brand names.
Several years ago, Funai began offering products under their own brand name as well. Funai is especially expert at lower cost products and although their own branded products have done well…the Funai brand never really achieved a market status equal to the major players in the industry.
A deal with Philips…
Then, in 2008, the company cut a deal with Philips to take overs its TV business in the U.S. With this deal the company manufactured and sold TV sets under the Philips and Magnavox brand names. According to sources, this deal was extremely successful for Funai.
Now, the company has an opportunity to do the same on the AV side, if they prevail to win the business. Pioneer took market leading positions in laserdiscs and plasma TVs – and while they are no longer in those businesses, it is still an excellent brand name that customers around the world know and are comfortable with.
Pioneer sticks with car electronics…
For some time now, Pioneer has targeted their car electronics business as a core category for the company. This segment, including car navigation systems, is currently a full 70% of their business and growing. The company plans to continue to expand this business as in-car safety, and what is known in the business as infotainment features gain popularity.