Business Tech

The rough seas of the consumer electronics business has caused yet another smaller boat to capsize. Soyo, the maker of Honeywell TVs, has filed for Chapter 7 bankruptcy protection.

(Credit: CNET)

The news was first reported by the HDGuru.com blog. An SEC filing from earlier this week states that the company shut down operations on May 5, and filed for Chapter 7. Chapter 7 means the company is planning on liquidating its remaining assets, with no plans to reorganize under a new repayment plant to creditors, as a Chapter 11 filing would allow. The company could not be reached for comment.

Soyo makes LCD monitors, portable hard drives, and Bluetooth ear pieces, but is probably most recognizable since it owns the license to sell TVs under the Honeywell brand name. It's unclear how customers who recently bought Honeywell TVs are to deal with repairs or warranties issued by the company.

While Honeywell wasn't one of the top brands of TVs, its exit from the TV market is yet another sign of the ongoing shakeout taking place in the consumer electronics business. Syntax-Brillian, maker of Olevia brand HDTVs, filed for bankruptcy last summer, shortly after Philips turned over its North American TV operations to Funai.

More recently Pioneer has said it will no longer produce TVs after March 2010

Like Pioneer, Soyo's exit from the TV business was forced by mounting losses, in this case, more than $25 million in loans. Worldwide TV sales dropped 6 percent in the most recent quarter, as consumers find themselves with less discretionary income to spend on gadgets, and as the market for LCD TV buyers becomes increasingly saturated.

The typical way gadget makers deal with declining sales is to introduce new technology. But the TV industry is still years away from the next step of broad availability of OLED (organic light-emitting diode) TVs. They're still prohibitively expensive to produce on a large scale, and most companies working on OLED right now--Sony, Sharp, LG, Panasonic--don't seem to be in a rush.

Until then, expect to see more stories like this one, companies either dropping out of the TV business altogether, combining operations with a competitor, or licensing its brand away in certain markets.

TV makers worldwide saw their revenues slide 12 percent in the last year, according to a report set to be released Tuesday by DisplaySearch.

A total of 43.3 million TVs were sold worldwide in the first quarter of this year, a 6 percent drop compared to the same quarter a year ago, and prices dropped 6 percent, too, according to the Quarterly Global TV Shipment and Forecast Report.

Even Samsung, which collects more money in its coffers for TVs than any company in the world for the past 13 straight quarters, saw its revenues drop 8 percent since the same time last year. But it still held its lead in the industry, maintaining a 21.5 percent share of dollars spent on TVs worldwide.

The biggest shake-up in the last quarter came from LG Electronics which, at 2 percent growth from a year ago, was the only one of the top five manufacturers to see an uptick in revenues. It was able to leapfrog Sony into second place, claiming 13.3 percent of the TV market. Sony garnered 13.1 percent, followed by Sharp with 7.2 percent, and Panasonic with 6.1 percent.

Panasonic appeared to have the most trouble in the most recent quarter. It saw revenues from TV sales drop 22 percent over the last year.

These kinds of slumping progress reports from all sectors of the technology industry have become practically commonplace. Declining revenues are particularly a problem in consumer electronics as shoppers are finding themselves with less discretionary income.

Update: This article was corrected to reflect that the information is for the fourth quarter of 2008, not the whole year.

The liquid crystal display TV market is beginning to lose some steam.

The fourth quarter was the first time that the total number of shipments of LCD TVs in North America was lower than the same quarter the previous year. Just 8.7 million units were shipped during the last quarter of 2008, a 2 percent decline from the 8.9 million shipped during the same time in 2007, according to data released Thursday by DisplaySearch, which tracks the TV industry.

In December, DisplaySearch issued a warning that in 2009, revenue from selling LCD TVs will also fall for the first time ever.

Plasma TV makers were ready for this, it seems. Plasma TV shipments actually increased 28 percent during the fourth quarter of 2008 (peak holiday season), and overall were up 10 percent for the year.

Plasma may have seen a bigger demand during the quarter because of the current economic climate and increasingly cost-conscious buyers: plasma tends to be more cost effective, and TVs sporting the technology are generally 5 to 10 percent lower in price than similarly sized LCD TVs, according to Paul Gagnon, who monitors the TV market for DisplaySearch. In some cases, plasma shipments actually grew at the expense of LCD, he said.

Meanwhile, the number of major manufacturers producing plasma sets is declining. No. 3 plasma maker Vizio said Wednesday it would cease production of plasma and focus entirely on LCD TVs. And late last week a report surfaced that Pioneer was leaning toward exiting the plasma business as well. That leaves just Panasonic, Samsung, and LG Electronics as the major producers of plasma TVs. Gagnon expects Panasonic and Samsung, who already hold about three quarters of the plasma market in North America between them, to pick up where Vizio--and possibly Pioneer--leaves off.

"Both Samsung and Panasonic will probably evenly split (what's left) up," he said. "But Panasonic is in a little bit better position in club store channels than Samsung," where Vizio is strongest.

Also of note in DisplaySearch's data: Sony gained a lot of ground in LCD TVs during the fourth quarter of 2008. The company shipped just over 16 percent of all LCD TVs to North America, creeping closer to Samsung's 19.3-percent share. Sony hasn't had a share that high in more than three years. Gagnon says that the fourth quarter is always a highlight for Sony, but that the company, which usually positions its brand as higher end, was actually "neck-and-neck" with Samsung on pricing during the holidays.

We shouldn't expect that to continue into 2009, according to Gagnon. "They'll probably be more conservative" about pricing, he said.

Updated 2/12/09 at 9:35 a.m. PST with Pioneer's confirmation.

Pioneer will no longer manufacture televisions and plans to spin off its DVD player business into a joint venture with Sharp, according to a report in Japan's Nikkei newspaper.

The company is reportedly exiting the TV business rather than continue to incur losses in that division. This latest report comes a few months after Pioneer announced it anticipated huge losses at the end of its fiscal year in March and plans to lay off 2,000 workers.

Pioneer had built itself into a widely respected maker of plasma televisions, but last March said it would not make the plasma panels anymore because of skyrocketing costs and mounting losses in its TV division. It tapped Panasonic to provide the panels instead, but that deal appears now short-lived. Another clue this was coming: Pioneer showed no specific models of TVs at CES last month.

Pioneer is not alone among TV makers losing money. Everyone from Panasonic to Samsung to Sony is facing layoffs and large quarterly losses.

Update: Pioneer confirmed it will stop producing televisions by March 2010 and cut 16 percent of its employees.

Next year is shaping up to be a nightmare for LCD TV makers.

Revenues for LCD TVs sold worldwide in 2009 are expected to fall 16 percent from 2008, to $64 billion, according to an update to DisplaySearch's Quarterly Global TV Shipment and Forecast Report, released Thursday. Next year will be "the most difficult year yet for the TV industry and supply chain," DisplaySearch writes in the report.

The culprits are rapidly declining prices of LCD TVs and lower shipments to retailers due to slackening demand. DisplaySearch expects 2009 LCD shipments to drop to 205.3 million unites, which is a 1 percent decline from the 2008 total of 206.4 million units.

The recession in the U.S., and the instability in the global financial markets, have hit the consumer electronics industry hard. By the second half of 2008, TV prices were already beginning to fall as manufacturers competed heatedly for customers. But as prices drop, so do the margins that TV makers, suppliers, and retailers can bring in.

So far, few have been immune, including some of the biggest names in electronics. Sony's TV shipments fell drastically, leading to layoffs and factory closings last week, Panasonic has said its profits will take a hit, and Samsung has said it is planning on cutting back on investments as its sales and profits fall.

The problems developing in the LCD TV business have been brewing for over a year. When LCD TVs were still a relatively new product and the top tier brands were still charging fairly hefty premiums for their sets, small, lower-tier brands found their way into the mainstream by selling through club stores and discount chains at lower prices.

Customers responded in a big way, driving lower tier Vizio, for one, into one of the top TV makers in the world. Sony, Samsung, Sharp, LG, and others, responded too--by lowering their prices in what became a slow race to the bottom.

But looking ahead to next year, just treading water appears to be a lofty goal. The keys will be taking advantage of emerging markets where LCD TVs are still a novelty, by creating or beefing up a line of lower-end TVs for North American and Western European markets.

It could hold them over until the LCD market rebounds, which DisplaySearch says will happen in 2010. By then, revenues for LCD makers should push back above $70 billion.

When Leslie Martinez walked into a Los Angeles-area Best Buy two weeks ago looking only for a 40-inch Sony Bravia LCD TV, she walked out with a heavily discounted Blu-ray Disc player, some Blu-ray movies, and half-priced HDTV accessories.

After seeing the TV she wanted at Costco, she turned to Best Buy to see if they could match the price. In the end, after a bit of negotiating with a salesman, the electronics retailer did much more than that.

"He made it almost impossible to walk away," Martinez said.

Retailers have offered bundled Blu-ray players with TVs before, but the way Martinez was able to haggle over the details sounds more like buying a car, not purchasing a TV at the biggest electronics retailer in the nation. And this is before the all-important late-year holiday sales rush, when the most attractive prices are normally found. It could be a sign that many of the best deals offered this holiday will be earlier, when retailers are still nervous that they won't be able to sell the products they ordered.

Though there's been a lot of "cautious optimism" regarding how consumers already hit hard by a downturned economy will respond when the holiday sales season really gets in gear, retailers now have a better idea of what to expect. The Consumer Electronics Association on Monday released its annual CE Holiday Purchase Patterns Study, and the news isn't great. The trade association expects just 3.5 percent growth in electronics shipments during the final quarter of the year compared with last year. It's so low that as Jim Barry, a CEA spokesman, said, "Any increase is a good thing."

And though when consumers were asked what items were on their wish lists for the holidays, 4 of the top 10 were CE devices like TVs, cell phones, and video game consoles. While that's encouraging for the industry, consumers are still tightening their gift budgets this year. Respondents to the CEA survey plan to spend $1,437 this holiday, which includes gifts, food, and decorations. But more importantly, it's $200 less than what consumers reported they would spend last year. That means something is getting cut out this year, and it's probably not food.

That could explain the great deal Martinez was able to find even before the traditional holiday shopping season. She'd seen the LCD TV model she wanted in Costco for $1,399, and the closest one she could find at Best Buy was $1,799. Armed with a photo of the price tag of the set seen at Costco, she asked a Best Buy salesman if he could match the price.

"He said, 'Since (ours is) a newer model, we can come down to $1,499 for you,'" Martinez recounted to CNET News. After consulting with her more tech-savvy brother, she told the Best Buy salesman she'd have to think about it since the price was still more than she expected to spend.

Clearly not wanting to lose the sale, the salesman decided to sweeten the deal. He threw in 20 percent, then 50 percent, off her accessories like an HDMI cable and surge protector. When Martinez still wasn't convinced, they went back and forth a few times before he added a Blu-ray Disc player--discounted from $399 to $199--and three Blu-ray movies.

The pressure to move products like TVs and Blu-ray players right now is only the latest sign that this holiday is not going to be particularly healthy. We've seen the signs coming since earlier this year, and retailers have been understandably nervous coming into the fall and winter. Those springtime stimulus checks from the government weren't just for fun--the retail economy has been sluggish for some time now.

"As we've gone through the summer, even up to Labor Day, back-to-school was relatively slow. (Retailers) made decisions that demand was likely to be reduced this holiday. A lot of retailers weren't as willing to stock up," said Steve Baker, an NPD Group analyst who follows consumer electronics retail.

The decisions for the TVs, PCs, cell phones, and GPS devices we see on shelves in November and December are made between February and March. Retailers decide on what products they want, and gauge which sizes, features, and colors they want to push. For Black Friday pricing specials (the day after Thanksgiving) those decisions must be communicated to vendors by July in order to ensure the correct number of volumes can be produced in time.

But this year, with so much uncertainty, retailers have been waiting until "the last possible moment" to place their orders, according to Steven Cook, vice president of strategy for Samsung.

Inventory just sitting on shelves is a concern for retailers because they don't want to get caught with an excess of gadgets, and some may prefer to set up contingency plans instead.

Rather than ordering a bunch of TVs up front, for instance, vendors can be conservative about how many they take, and strike an agreement with specific brands ahead of time to supply smaller, emergency volumes of their TVs later, if it appears that they're selling better than they thought.

According to Baker, "They're thinking 'I'd rather run out than have a ton leftover.'"

This could work out well for consumers. If you're being conservative with your budget like many people have said they will be--and retailers are clearly aware of this--they know that on certain products no matter how much they lower the price, that's not necessarily going to get you in the door.

For that reason, trying to wait out retailers on their prices by buying as late as possible--as we've seen for the past few holiday seasons--isn't a sure bet. Because they'd rather have too few TVs than too many, there will still be good deals to be had, as Martinez' Best Buy experience shows, but it looks to be earlier this year than usual.

The roughly two-month shopping period before school starts is typically fruitful for consumer electronics retailers. Not this year.

All categories combined showed minimal growth. Although notebook sales increased 10 percent over the same period the year before, desktops were down 3 percent. And products that have been guaranteed big sellers in past years continue to lose momentum: digital-camera sales were down 1 percent, printer sales were even, and MP3 player sales were up 7 percent.

Will Netbooks give electronics retailers the bump they need this holiday shopping season?

(Credit: Hewlett-Packard)

This is especially concerning to electronics retailers, since the all-important holiday shopping season is approaching, a time when they typically can expect to play catch-up in yearly sales and revenue.

"The holiday (period) is likely to look a lot like back-to-school, I think," said Steve Baker, vice president of industry analysis for NPD Group, which tracks electronics retailing. There's likely to be "a little bit better demand" because there are a broader array of categories that people shop for during the holiday. For back-to-school, retailers push mostly computers and peripherals.

The problem with notebooks: they've been selling so well for so long that the category just can't sustain that kind of growth forever. Growth percentages in years past for laptops during the back-to-school shopping period have been in the high teens and low 20s, which is why 10 percent growth this year is disappointing for retailers.

And when a market matures, steep price declines are harder for retailers to offer. Notebooks from brand names have been routinely available for less than $600 for a while, and retailers are finding it harder to cut prices and maintain acceptable profit margins. The same could be true for Black Friday and beyond, when retailers usually unveil their best deals of the year.

Of course, back-to-school shopping isn't a perfect indicator for holiday shopping, especially when it comes to an important category like notebooks. Portable PCs will become even harder to predict this year because of the so-called wild card that Netbooks present. Every major PC maker has one now, but they haven't been available in large volumes. This will change in the next few weeks, and it will be interesting to see if mainstream consumers find a use for them.

New product categories, combined with disturbing financial news, makes it harder for electronics retailers to feel comfortable heading into the holiday season.

"The word everyone (in electronics retail) uses when I talk to them is 'uncertainty,'" Baker said. "People can handle, 'We're sure it's going to be bad,' or, 'We're sure it's going to be good.' But 'We're not sure what it's going to be' is tough to plan against."

It appears the TV industry's self-prescribed medicine of pushing smaller flat-panel sets is working.

The second-quarter check-up is in, and the industry is in far better health than a year ago. DisplaySearch's Quarterly Global TV Shipment and Forecast Report was released Thursday, and worldwide TV shipments increased 11 percent from the same period in 2007, but just 3 percent from first quarter of 2008.

(Credit: LG Electronics)

Still, the news is encouraging to an industry that was wringing its hands back in March over running out of places to sell its rapidly maturing, but still-pricey sets.

Around that same time, some of the bigger tier-one manufacturers began pushing smaller screens in an attempt to attract buyers who might be tightening their budgets as gas and food prices rose.

Vizio made a splash with its 32-inch plasma, a size that hasn't been available in that technology in the U.S. for a while. Even the big guys like Panasonic, LG, and Sony and Samsung were going small: 32, 40, 46 inches.

"Sony and Samsung launched what we termed 'fighter models,' because they were designed to reach new pricing lows," said Paul Gagnon, who monitors the TV industry for DisplaySearch. Vizio's smaller plasma was specifically launched "to blunt the impact" of Samsung's and Sony's moves into smaller-and-cheaper sets, he added.

Vizio's 32-inch plasma sells in club stores for about $550, while Samsung and Sony's 32-inch LCDs each retail for $699, the lowest price each has ever offered for that size TV.

The result has been a resurgent plasma TV business. DisplaySearch is reporting that shipments of plasma worldwide increased 52 percent from the same quarter a year ago, or 3.4 million units. That's way behind LCD TV shipments, but it's encouraging for a technology that many of the biggest vendors had basically left for dead.

Plasma shipments are on the rise everywhere, but they are particularly healthy in China, where they rose 285 percent in the last year.

To be sure, LCD TVs are still the new television of choice for most. LCD shipments jumped 47 percent in the last year to reach 23.7 million units (compared to plasma's 3.4 million units) in the second quarter worldwide, DisplaySearch says.

Despite LCD's established presence in many North American living rooms, it appears that the introduction of smaller sizes and lower prices are helping retailers to move plenty of product. Last year, LCD shipments to the region were dropping. But second-quarter shipments increased almost 30 percent from a year ago.

And LCD prices have still been dropping more quickly than plasma. With major shopping opportunities like Labor Day, the beginning of football season, and Black Friday fast approaching, plasma's recovery could be brief.

Sony and Samsung tend to set the pace on price reductions, and Gagnon of DisplaySearch says the other brands will all react in order to maintain their brand position in the market. If Samsung drops its 42-inch LCD $100 in the coming weeks, expect Panasonic to do the same on its 42-inch plasma.

But it doesn't appear there are going to be bold moves on the part of plasma to steal some more share and get ahead. For all the brands, said Gagnon, "it's all about maintaining price differential."