The Difficulties of Panasonic and Samsung Stock over the Past 10 Year free essay sample

The difficulties of Panasonic and Samsung Stock over the Past 10 Year Financial Accounting: Statement Analysis Decision Making BE 310M By: The Four Elements: Brenda Clay-Ozenne School of New Dimensions Albertus Magnus College May 5, 2013 This paper was prepared for Financial Accounting, BE 310M, taught by Instructor Mark Vausio. Running head: Panasonic/Samsung What has these two Companies been doing over the past ten years? Well according to their Company’s profile and stock reports, they have not been doing very well over the past 2-3 years. Panasonic has not shown a very favorable return on their stocks in the last 3 years. Their historic leadership in key areas such as TVs, audio devices, mobile phones[-gt;0] its been eroded by the likes of Samsung and Apple. In addition, it has been too long since they have come up with successful, market-leading must-have products. We dont see this changing over the next 2, 3 years. We will write a custom essay sample on The Difficulties of Panasonic and Samsung Stock over the Past 10 Year or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page † [1] Panasonic Better Positioned To turn around its fortunes, Panasonic, maker of the Viera TV, is looking to expand its businesses in appliances, solar panels[-gt;1], lithium batteries, and automotive components. Appliances account for around only 6 percent of the companys sales, but generate margins of more than 6 percent and make up a big chunk of operating profit, Reuters reported. (Read More: Panasonic Cleans House with Write downs, Sees $9. Billion Loss) Sony, creator of the Walkman cassette and CD player, is focusing on consumer gadgets such as digital cameras and gaming devices. Jamieson said Panasonic is in a better position than Sony to survive the slump because it has a stable business of durable goods such as fridges and washing machines. Although Panasonic is facing weak competitiveness in its core TV business, particularly the panels and TVs, it has the advantage of a relatively stable consumer electronics division that is still generating positive margins, he s aid. However, for the two firms to stage a genuine turnaround, something they have failed to achieve so far, they will need to bite the bullet and completely exit some of their loss-making businesses. † Jamieson said. They need to curb, or completely exit their loss-making businesses and focus on their key strengths and these business lines[-gt;2], where they are able to generate profitability and rediscover that kind of technology leadership which historically they were famous for, he told CNBC. 1] With this being said just what has their stock options looked like over the past three years, not a very pretty picture. Revamping of their appliances and electronics division is definitely in order. Let us look at their last stock report. Panasonic 5 year report [-gt;3] The next company that we are going to look at is Samsung and their overall report on their company and their stock report over the past 2-3 years. â€Å"Samsung Corporation is for the most part doing very well; they hav e had an increase of over 60% in sales and in their stock reports. Who could ask for better but let us take a better look at the company Samsung just reported quarterly earnings[-gt;4] that look spectacular from 10,000 feet †¦ but on closer inspection show some worrisome signs. Year-over-year, the 7. 15 million won (about $6. 4 billion) net profit for this year’s first quarter was an improvement of 42%, which certainly is impressive. However, that is very different from the 81% improvement from Q1 2011 to Q1 2012. It is also just a 1. 4% improvement from Q4 2012? s 7. 05 trillion won. What all of this means is that Samsung’s pace of growth has been slowing — troubling trends for shareholders, who have enjoyed 60% gains over the past two years but have seen the stock flatten over the past few months? And while Smartphone[-gt;5] sales tend to slow in this quarter as consumers anticipate new releases, Samsung’s reliance on cell phone profit actually increased slightly — from 73% to 74% — suggesting it’s leaning even more heavily on mobile. (Bad news, considering Samsung has warned investors about increased mobile competition — a threat to the segment that dominates its profits. Samsung has been going gangbusters on selling phones[-gt;6], but the company makes dozens of different models, many of which are cheap feature phones — good for overall market share, which is how the company unseated Nokia (NYSE:NOK[-gt;7]) after 12 years to become the world’s top cell phone vendor[-gt;8] — but not so good f or profits. And what they have been doing. † [2] Even with this being said Samsung still had a lot of work to do because they are not out of the woods just yet, they still have a major competitor to deal with, and that is the Apple Co. Because even though Samsung has made just about 4 billion dollars more than Apple over the past years, this is not a long term investment because there is still other products that the company has that has not fared so well, and the company needs to make changes and advance in the other areas as well. Despite that diversification, Samsung’s revenue for the quarter totaled 52. 87 trillion won (roughly $47. 3 billion), which is not much more than the $43. 6 billion in revenue Apple reported. Another way of looking at this is to consider the impact if Smartphone sales were to drop significantly. Apple would take a hit in this scenario, but its iPad sales are robust, its other divisions make money and it has room to expand its product line into something else (like TVs) if needed. Even with the iPad’s lower margins — estimated to be in the 37% to 40% range — Apple would still be a highly profitable company if smartphone sales fell. Investors would not be happy, but the company would not be in trouble. Samsung’s plan B is hazier. While it dominates mobile phone sales[-gt;9] with nearly 33% of the Smartphone market, Samsung is a relatively small player when it comes to tablets with a roughly 8% share. Even though it hopes to double last year’s number (to roughly 40 million tablets for 2013)[-gt;10], Apple moved half that many in Q1 2013 alone. Sure, Samsung has all those other product lines, but even the ones where it is a dominant player — TVs, for example — it is not performing well. TV profit margins were 2% in the last quarter; better than losing money, but nothing to brag about. There are no real new product silos to pursue; Samsung has tried it all, and it is not making much from those other lines of business. This huge range of established products can be looked at as an advantage[-gt;11], but it also could become a drag on earnings if those Smartphone dollars disappeared. [2] Here is a snap shot of Samsung’s Stock report. [-gt;12] So with both of these companies trending or not trending in today’s market, which one will fare better, well for me it looks like Samsung has a better chance. References 1. Sony, Panasonic Face 2, 3 Years of Poor Profitability: Fitch Published: Friday, 23 Nov 2012 | 2:02 AM ET By: Jean Chua[-gt;13] Writer CNBC. com Asia 2. Just How Strong Is Samsung Right Now? Diversification might not be a blessing for the S. Korean tech giant Apr 29, 2013, 4:00 pm EDT | By Brad Moon[-gt;14], Investor Place Contributor One interesting point of comparison between Apple and Samsung is the average profit margin they have on their mobile devices. Apple has been able to maintain margins in the 49% to 59% range for its iPhones[-gt;15], while the Wall Street Journal says Samsung hit 19. 8% in Q1[-gt;16]. That’s how Apple can snap up more than 70% of the smartphone market’s profits despite Samsung being the world’s largest mobile phone manufacturer with sales nearly double the number of Apple’s units[-gt;17]. -gt;0] http://www. cnbc. com/id/49936544 [-gt;1] http://www. cnbc. com/id/49936544 [-gt;2] http://www. cnbc. com/id/49936544 [-gt;3] http://www. bing. com/images/search? q=panasonic+stock+historyqs=ASsk=AS1FORM=QBIRpq=panasonic%20stock%20sc=8-16sp=2qs=ASsk=AS1#view=detailid=AC46E90576E2ABD3EEDFE5D1EDB32D40C2966150sele ctedInde x=248 [-gt;4] http://www. samsung. com/us/aboutsamsung/news/newsIrRead. do? news_ctgry=irnewsreleasenews_seq=20728 [-gt;5] http://investorplace. com/2013/04/just-how-strong-is-samsung-right-now/ [-gt;6] http://investorplace. om/2013/04/just-how-strong-is-samsung-right-now/ [-gt;7] http://studio-5. financialcontent. com/investplace/quote? Symbol=NOK [-gt;8] http://www. pcmag. com/article2/0,2817,2413347,00. asp [-gt;9] http://investorplace. com/2013/04/just-how-strong-is-samsung-right-now/ [-gt;10] http://reviews. cnet. com/8301-13970_7-57571311-78/samsung-says-it-plans-to-double-its-tablet-sales-this-year/ [-gt;11] http://www. forbes. com/sites/haydnshaughnessy/2013/04/12/these-3-game-changers-define-the-apple-vs-samsung-battle/ [-gt;12] http://www. ing. com/images/search? q=Samsung+Stock+ChartForm=IQFRDR#view=detailid=BFF2A4A8AF4A18628BFAD5269A8A22D082290BA4selectedIndex=76 [-gt;13] http://www. cnbc. com/id/46861145 [-gt;14] http://investorplace. com/author/brad-moon/ [- gt;15] http://www. reuters. com/article/2012/07/26/us-apple-margins-idUSBRE86P1NI20120726 [-gt;16] http://online. wsj. com/article/SB10001424127887323335404578445532742015350. html [-gt;17] http://www. forbes. com/sites/haydnshaughnessy/2013/04/26/samsung-rises-to-nearly-double-apples-smartphone-sales/