Pioneer moving out of DVD recorders?

There’s a story around that Pioneer is pulling out of the DVD recorder business.

I wouldn’t like that because I think Pioneer’s DVD recorders are the best around at the moment. So I asked Pioneer Australia for its comments. It provided Qs and As (Word DOC format, 27kB, right click and choose ‘Save Target As …’) from the parent company and offered the following comment:

I have attached an announcement from Pioneer, which details that Pioneer is not pulling out of manufacturing DVD recorders all together. The newspaper story was inflated.On June 4, Nikkei Newspaper reported as attached below; in essence;

  1. Pioneer will end development of DVD recorders.
  2. Pioneer will ask Panasonic to ally on the next generation recorders.

We have not released any information to Nikkei. Both points are incorrect.On June 6, we will hold a corporate information meeting where we will announce our mid-term strategy on key business lines, including DVD recorder business. The detailed presentation will be up on our Web site on the same day, so please refer to the accurate information, there.

Our stance is as follows:

  1. Pioneer will continue to develop DVD recorders, by focusing on the area where we can demonstrate our strength.
  2. As to Blu-ray disc technology, Pioneer is a front-runner. However, we do not deny that we are working with various companies for the development of LSI, etc.

I don’t think I need to say anything more.

UPDATE (Thursday, 15 June 2006, 11:54 am): Pioneer’s new Q&A, issued after its 6 June management meeting:

Information Meeting Question and Answers
June 6, 2006
Question Answer
What specific actions will be taken to allocate more resources to the car electronics business beginning in the current fiscal year? We plan to reassign a number of personnel from across the Pioneer Group to this business to reinforce car navigation systems and OEM products.
Why are you retaining the Blu-ray disc business? Won’t it be just as difficult to achieve profitability in this business as in the DVD business? The Blu-ray disc format delivers 1080p, high-definition pictures. Blu-ray disc players are therefore essential to the plasma display business. High-definition digital broadcasting is currently available in Japan, the U.S. and Europe, but has yet to reach other regions. Blu-ray disc players are thus needed to enjoy high-definition picture quality in these regions. Pioneer is positioned for leadership in this field because it is at the forefront of this technology. The fact that we supply Blu-ray drives for PCs gives us another competitive advantage.
Does the Blu-ray market face the risk of overheated competition, as with DVD products? We hope to make the most of our experience in the DVD products business, drawing on the challenges we faced and the lessons we learned. Instead of developing everything by ourselves, as we did in the DVD products business, we must form collaborations to hedge risks.
How will you utilize existing assets in the DVD recorder business? What will change? Thus far, we have conducted the DVD recorder business on our own. Looking ahead, we will actively forge alliances with other companies. The main thrust for developing the Blu-ray disc format will be Blu-ray disc players as a top priority. The Blu-ray disc recorders will have less priority. The development of DVD recorders will be continued in Japan and Europe, where we will not incur large development expenses.
Despite booking impairment losses, focusing resources on Pioneer’s brand, and increasing capacity utilization, the plasma display business is still in the red. Will you really be able to restore profitability in this business? Internal discussions are underway to clarify Pioneer’s strengths and the value we offer to customers. We believe it is crucial to develop a premium product lineup, especially in terms of technologies for production processes and image processing. That said, at some point we must take the initiative to reap economies of scale. Although we are willing to form partnerships, no concrete plans are on the table yet.
I have the impression that Pioneer has been slow to respond to change over the years. What steps will you take to address businesses that remain unprofitable in the years ahead? Every business that posts losses for two or three consecutive years will be subject to review.
Can you explain your plans for a new plasma display plant in more detail? Our medium-term goals for the fiscal year ending March 31, 2009 are premised on the construction of a new production line. However, plans for the new line are currently under review and have yet to be finalized. We aim to bring the new production line on stream before the start of the 2008 Beijing Olympics.
When will Pioneer’s Blu-ray disc players appear on the market and how will they be priced? Plans call for launching Blu-ray disc players in North America first, but sales are expected to be delayed until autumn. The price will be around $1,800. Launch dates in other regions will be determined in conjunction with software availability.
What are your plans for revitalizing the audio business? I cannot comment on the details of this process yet. However, I can say that in our speaker business, for example, we have excellent products for the home use and in-car use. But these operations are dispersed throughout the group, and there has been very little cross-development. We will be paying closer attention to this issue.
Do you plan to employ OEM procurement in the existing low-end DVD recorder business? We have already begun doing so. We currently supply components for straight-type DVD players and DVD recorders/VCR combos to OEM partners and purchase finished products from them. We will be redoubling efforts in this area.
Pioneer is forecasting operating revenue of \950.0 billion in the fiscal year ending March 31, 2009, a fairly ambitious target. Can you provide a breakdown by segment? We have yet to precisely determine the future revenue structure of the Home Electronics business. This target is considered an overall benchmark for operating revenue.
Does this mean you will retain an operating margin of 7% in car electronics business? We should be able to achieve an operating margin of 7% in the fiscal year ending March 31, 2007 and retain this margin thereafter, despite relatively lower profitability in the OEM business. This will be accomplished through higher sales of car navigation systems and audio products for consumer markets, as well as cost reductions.
What is the current status of declines in unit prices and cost reductions in the plasma display business? Cost reductions are proceeding on schedule. Prices have remained higher than expected. New product launches, shifting from the sixth to seventh generation of displays, are expected to give a positive impact.
What impact will the cancellation of active-type organic light-emitting diodes (OLED) have on earnings? It will give us a positive impact of around \3.0 billion on earnings.
How were earnings in the passive-type organic light-emitting diode business? What are the growth prospects in this business? This business has yet to achieve profitability. We will be formulating a medium-term business plan for this business soon, but the outlook is still unclear.
What percentage of passive-type OLED sales was to outside customers? I don’t have concrete figures on hand.
What investments are you making in the plasma display business? I cannot comment on specific figures yet. However, investments will take into consideration the need to balance development, production and sales capabilities.
Could existing DVD recorders fade out this year? No.
Do you plan to review Pioneer’s group-wide strategy? As I said, one key theme will be to consolidate our speaker business, which is spread throughout the group.
Do you consider your medium-term targets to be conservative? These targets are seen as minimum level of performance we must deliver. We have established some conservative targets in the car electronics business, and included some risks in the Home Electronics business
Could Pioneer decide to divest the DVD recorder business? The optical disc product business encompasses a broad range of fields, not only including DVD recorders, but also the DVD drives for PCs and the design of pickups and chipsets for PC drives and mechanical components. Our overriding goal is to restore profitability in the optical disc product business. Because we believe this goal is achievable, we do not plan to divest this business.
Do you plan to divest any subsidiaries besides Pioneer Precision Machinery Corporation? Business divestments target only non-core operations. But we don’t have any more such plans at the moment.
What is your outlook for the weighting of 1080p displays relative to overall plasma display sales? We are currently studying this matter.
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