Firms rebound from Asian financial woes
Sony, Matsushita and other Japanese companies are seeing their stock prices hit new one-year highs as individual investors begin to warm to the possibility of a recovery in that country's economy.
Sony's share price is on the rise for the third straight day after announcing that it would split its stock 2 for 1 early next year. The company set another all-time and 52-week high, rising 10.31 to 277.81 in afternoon trading.
Meanwhile, NTT DoCoMo, the Japanese wireless giant, became the third largest company in the world in terms of market capitalization on a 1999 stock surge that contrasts strongly with recent history.
Hitachi and Matsushita are still trading near all-time highs, although they are both off in midday trading today.
"Japan stocks lagged the U.S. stock market for a long time. Nobody wanted to play because of what was happening to world economies," said Jeff Pittsburgh, president of Pittsburgh Institutional, a financial research firm.
Some Japanese companies are now starting to get the kinds of valuations that had been reserved for high-flying U.S. Internet stocks.
Sony has seen its share price climb about 285 percent this year, as investors, encouraged by a brightening economic outlook next year, piled on to the stock. Matsushita benefited from the afterglow of Sony's performance, financial analysts said, reaching a 52-week high of 289.13 yesterday. Investors could be expecting Matsushita, makers of Panasonic brand products, to follow Sony's lead and split its stock as well, they said.
Peter Wolff, managing director at ING Barings, said Sony's moves into banking and stock trading, along with the insurance subsidiary it already owns, gives the company a leg up on competitors as it moves to sell products and services online.
"Sony is one of the few larger companies that has been able to remold itself in the Internet era," he said. Because of the strength of its brand name worldwide, Sony has been attracting a lot of foreign investment, which is helping push Sony's share price up, he noted.
Production of electronic goods such as personal computers, audio-video equipment, phones and other electronics are predicted to increase 3.8 percent next year, according to the Electronic Industry Association of Japan. Production of the electronic components and parts that go into gadgets and PCs will rise about 5.1 percent, the association estimated.
By contrast, in 1998, electronics makers reported a 9.4 percent decline in output and only slightly recovered in 1999, posting an anticipated 0.4 percent increase in production.
Sony, in particular, has led the recent surge based on how well the company is expected to be able to address the convergence of PC and TV technologies.
"They are going full boat towards the information highway in every medium they can," said Pittsburgh. In Japan, the company owns its own Internet service, he said, and a cable company. In addition to the its business in the TVs and PCs needed to access those services, the company owns music and movie production houses to provide content. Sony also has sells its products directly to consumers online, similar to direct sales giant Dell and others.
The company is aiming to replicate its multipronged strategy in the United States, although progress has been slower here. For instance, the company will sell 3 million cable set-top boxes to Cablevision of New York and will introduce its PlayStation 2 game console next year, both of which could enable the kinds of e-commerce services Sony is offering in Japan. The company has some obstacles to overcome before that vision of convergence is realized, though.
"Sony is a huge company with a lot of platforms, services and products in many, many different areas. Where they see convergence happening, they are orienting product planning around that and they're making progress," said Kevin Hause, an analyst for International Data Corporation.
However, the company has many separate divisions working on these plans which are at the same time trying to meet their own profitability goals, and sometimes that translates into an organization that is at cross-purposes with itself, rather than cooperative.
Bloomberg contributed to this report