Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



What You Need to Know About This Dangerous Industry

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Low demand for televisions is killing manufacturers.

For the past few months, LCD TV prices have been falling at a very fast rate. According to research firm iSuppli, LCD panel prices fell by around 4% in September 2011, and even lower in November 2011. With shrinking margins and decreasing profit levels, LCD panel makers are stuck between a rock and a hard place.

The horror!
Japanese conglomerate Sony (NYSE: SNE  ) suffered a loss of $349.9 million, its third consecutive quarterly loss due to low sales of its LCD TVs. The electronics giant warned investors about a loss for the fourth consecutive year, as it lost a jaw-dropping $2.2 billion in its television business alone.

That was the last straw. Having seen enough of red, Sony decided to end its joint venture with Samsung in manufacturing LCD TVs and sold its entire stake to its partner for an equivalent of $940 million.

Besides Sony, Panasonic also tasted losses in its third consecutive quarter amounting to $1.3 billion due to asset writedowns amounting to $1.8 billion. LG Display, the LCD panel maker, is going through rough times as well, having reported losses amounting to $580 million in the third quarter.

Television retailers haven't been in much better shape. Best Buy's (NYSE: BBY  ) third-quarter earnings dropped 29%, partly due to deep discounts it offered on televisions and other electronic equipment. Best Buy, like other bricks-and-mortar stores, is also facing the heat from online retailers such as Amazon, Wal-Mart, and eBay. Stores are turning into mere showrooms for customers who enter just to check out the products and then buy them online.

So what's causing the bloodbath in the LCD space?

First, an increase in manufacturing capacity has led to the oversupply of televisions, causing prices to fall. Secondly, the already weak demand situation worsened due to poor economic conditions. But these developments aren't deterring the technology giants.

Google, Apple hungry for TV pie
Rumor has it that Apple (Nasdaq: AAPL  ) , still an unlikely competitor in the television space, would introduce its very own television set in the second or third quarter of 2012. However, Apple's attempt to come out with a television set top box, which it was not too serious about, managed to capture one-third of the market. If Apple takes on the television space on a more serious note, it could very well mean stormier weather for the existing players.

Google (Nasdaq: GOOG  ) , on the other hand, has already taken a leap with the Google TV interface. In October, the company introduced the second version, which includes apps that viewers can use to search for websites, for shows from Amazon's instant video service, for movies with the help of Netflix, and even for live concerts. Nevertheless, whether all these frills would entice customers is yet to be seen.

So what's in store for the future?
Even after witnessing the carnage in 2011, research firm DisplaySearch believes that price drops for LCD TVs would be less pronounced in 2012. While LED TV prices would continue to fall, ordinary LCD TVs could witness stabilization in prices or even a gradual increase by the second half of 2012. Nevertheless, I fail to derive any comfort from this as the prices of the newer LED TVs might go south in the same way as LCDs. This, in turn, could continue to put pressure on manufacturers as they shift toward making more LED TVs to cash in on the premium price they attract.

The Foolish take
Poor demand coupled with cutthroat competition will definitely see television makers scramble to cut costs in order to shore up revenues. While the outlook for the U.S. seems to have brightened lately, the eurozone debt crisis continues to negatively influence emerging market economies. Therefore, television manufacturers may continue to face the heat; however, if analysts are to be believed, price drops might be less significant by the second half of 2012. Even then, I'd prefer to stay away from this sector for the time being.

If you're looking for a stock to profit off the latest technology trends, I'd suggest checking out The Next Trillion Dollar Revolution by clicking here.

Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Best Buy, Apple, Google,, and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Apple, Wal-Mart Stores, Google, eBay, and 

Motley Fool newsletter services have recommended writing covered calls in Best Buy. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. Motley Fool newsletter services have recommended writing puts in eBay. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1755473, ~/Articles/ArticleHandler.aspx, 10/27/2016 7:02:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:02 PM
SNE $31.84 Down -0.01 -0.03%
Sony CAPS Rating: ***
AAPL $115.59 Down -2.66 -2.25%
Apple CAPS Rating: ****
BBY $39.29 Up +0.03 +0.08%
Best Buy CAPS Rating: *
GOOGL $822.10 Down -6.45 -0.78%
Alphabet (A shares… CAPS Rating: *****