You Couldn't Pay Me to Buy This Tech Company Stock

Not to conjure up any bad memories from Old Yeller, but Panasonic (NYSE: PC  ) should be taken out behind the woodshed and put out of its misery before it dupes any other value-seeking investors into buying its stock.

Just because you don't like a product isn't enough reason to bet against it, but honestly, ask yourself the last time you saw a Panasonic product or heard about one that was considered cool. Still thinking? Don't feel bad, so am I! I'm pretty sure I was in grade school the last time Panasonic had a hot-selling item and it's for that reason that we need to kick this stock to the curb for good.

Having a well-known brand name isn't enough to get your products off the shelf anymore. Take a look at RadioShack (NYSE: RSH  ) , which is slowly transforming itself from "The Shack" to "The Shanty." Last week RadioShack cautioned investors that it would earn just $0.11 to $0.13 in the fourth quarter versus expectations for $0.36. Counting actual earnings-day misses, this was the fifth straight quarter of widening misses on a percentage basis.

Even Research In Motion (Nasdaq: RIMM  ) has found its way under the consumer guillotine. RIM was at one time synonymous with innovation -- now it's "that company with the tablet that collects dust on Best Buy's shelves." Most people know the RIM brand name, but few can tell you the last time the company's products excited investors.

This brings me back to Panasonic, which joined the trend of Japanese consumer electronics makers and significantly reduced its earnings forecast in lieu of increasing competition and weak demand. Panasonic expects to report a record loss of $10.2 billion for fiscal 2011 -- far more than the $6 billion analysts had originally predicted. Similarly, Sony (NYSE: SNE  ) warned of a $2.9 billion loss in fiscal 2011 and cautioned that its TV division would lose money for an eighth consecutive year. Rival Sharp (OTC: SHCAY) is also expected to run in the red by $3.8 billion.

These results are terrible, there's no two ways about it, but Panasonic's are just extra-bad.

For one thing, Panasonic is struggling to incorporate Sanyo's product line into the mix and has discovered that many of its divisions actually overlap. What Sanyo does have to offer -- solar products and rechargeable batteries -- simply isn't in demand right now.

Secondly, as I've mentioned, Panasonic's products just aren't cutting-edge anymore. In November, the company announced it would shut down two TV manufacturing plants and sell its flat-panel designs to competitors. That sounds more like a going-out-of-business plan than a demand furlough to me.

Finally, when all is said and done with fiscal 2011, Panasonic's cash flow will have been negative in two of the past three years. Panasonic simply can't keep this up while sporting $21 billion in debt and doling out $0.50 a year in dividends -- something's going to give, and my guess is it will be the dividend.

I'd recommend you do yourself a favor and do as I've done by adding Panasonic to the "No way in hell I'm investing in that -- even if you paid me!" list. I plan to make a CAPScall of underperform on Panasonic to show my confidence in this call.

Disagree with me? Sound off in the comments section below and consider adding Panasonic to your free and personalized watchlist. Also, if you want to avoid the pitfalls of investing in companies that fail to innovate, then I suggest you get your copy of our latest special report, "3 Hidden Winners of the iPhone, iPad, and Android Revolution." It's free and it's focused on the latest hot gadgets. Don't miss out!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He thinks a portable CD player is the last thing he bought from Panasonic. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Best Buy and RadioShack. Motley Fool newsletter services have recommended writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 that won't put your cows to pasture.


Read/Post Comments (2) | Recommend This Article (8)

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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.

  • Report this Comment On February 07, 2012, at 1:52 PM, hot67 wrote:

    That pretty much sums it up for a 100 year old company,very boring but very relevant.

    Of the 30 third world countries Have been to all but china have panasonic air conditioners,stereos,fridges,generators yada yada yada.................Boring yes,but they will be around another 100 years because after all this apple nonsense,facebook nonsense starts getting boring and it will..........panasonic will still be making all the essentials.

    My take is at 8 bucks a share you cant go wrong.

  • Report this Comment On February 08, 2012, at 8:23 PM, kuala1313 wrote:

    I'm not sure what planet you live on but this planet seems to have a problem with fossil fuels. Gasoline will set new record highs in the upcoming years.

    Those rechargeable batteries you find so boring are the cornerstone of hybrid vehicles and are in very short supply. The only thing holding up hybrid vehicles is the low supply and high cost of the batteries. The incredible demand for lithium ion batteries is one of the greatest opportunities in the next decade. Panasonic didn't buy Sanyo for its consumer electronics- it wants to be the premier battery supplier in the world and is putting a fortune behind the effort.

    The write off and big losses was mainly due to the Sanyo purchase and the cost of building a new factory to manufacture batteries. Toyota and several other manufacturers are already looking to PC instead of China to keep up with increasing demand.

    No hot products? Take a closer look. PC has the top commercial lodging TV on the market. Look how many hotels have yet to trade up to LCD TVs. All will have to make that expensive upgrade in the next few years.

    PC just introduced the first tab that you can drop kick and not hurt it. Try that with any other brand.

    PC is setting the standard for retail and commercial use of tabs that can hold up to full time use in business applications. Not sexy but highly necessary. Still think PC is not a player for the future?

    If you consider the incredible bad luck Japan has suffered the last 2 years it is amazing that any company survived. Can the bottom get any lower? You can wait to buy the stock once everyone else wakes up and pay $100 per share but at $8 per share I'm all in at the bottom.

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