Matsushita Electric Ind. (ADR) (MC)

Matsushita Electric Industrial Co., founded in 1918 is a global player involved in production and sale of electronic and electric products. It has a huge portfolio of around 86,000 products that mainly operates under the brand name Panasonic. The company operates in six segments with AVC Network division contributes maximum to the overall inflows i.e. around 40%; product profile includes televisions, DVD players, digital cameras, and audio equipments.

The consumer electronics industry is one of the most competitive in the world, with global market size reaching over $135 billion. Industry’s single digit growth rate and ever reducing product cycle is proving very difficult for many companies to survive. Although many major producers are facing a strong rise in units, the constant price-cutting is creating pressure. Adding to it, the increase in raw materials is also creating additional worries for the industry players.

Matsushita is witnessing a modest rise in revenues, the cost cutting and in house production is having positive impact on the margins. The plasma TV is the biggest revenue driver for the company in which it holds a strong market share. However, the stock is recently seeing a slide, with concerns over company’s plan to build a $2.4 billion plasma display factory, which may prove too costly. Adding to it, a strong threat from LCD (Liquid Crystal Display) televisions can make things difficult for the plasma factory in the future. Matsushita’s future outlook also does not look much appealing; mainly due to difficult conditions prevailing in the consumer electronics industry. Further, as more than half of company’s portfolio consists of maturing product line, it will be very tough for company to beat the benchmark returns in such a challenging environment, and thus making it logical to stay away from the stock at current levels.