Declining Optical Disc Business Spurs Spinoff of Pioneer AV

Pioneer Electronics is spinning off its unprofitable home AV and optical disc business to create a “leaner organization” and to eliminate “repetitive functions,” the company said in its Q3 fiscal 2013 earnings statement. Pioneer consolidated net sales rose 2.6 percent to $1.1 billion in Q3 ($1 = 93 yen) “despite a significant decline” in sales of optical disc products, the company said. The home electronics group posted an operating loss of $18 million, reflecting lower gross profit on sales of optical disc drive products and cable TV set-top boxes, Pioneer said.

Pioneer’s home electronics division sales declined 25.5 percent year on year to $263 million, despite sales increases in DJ equipment and AV systems, due to declines in disc-drive related products primarily for AV use, reflecting a “weak Japanese market,” the company said. Home electronics sales in Japan plummeted 57 percent to $73 million, while overseas sales grew 4 percent to $191 million, it said. Sales grew 2.6 percent in Q3 for Pioneer to $1.1 billion while the company reported a loss of $24 million.

Pioneer’s core car OEM electronics business has been hit by changing consumer preferences in Japan to more compact designs and by expansion of affordably priced cars in emerging markets, the company said. In Japan, the expansion of dealer-option markets has impacted the company’s consumer market business, it said. As a result, the company will “thoroughly review every process” of its business from development to production to sales and marketing, it said. Pioneer will promote modular design so it can integrate standardized key parts, it said, and realign production sites in Japan and overseas while shifting structure and resources from developed countries to emerging markets that are expected to grow, it said.

For fiscal 2013, ending March 31, Pioneer has reversed its forecast for a profit of $10 million predicted in November and now forecasts a $42 million loss for the year. Downward revisions reflect “stagnation in car navigation sales in the consumer market” and lower sales targets for home AV products, the company said.

Pioneer plans to cut 800 jobs as part of its restructuring and shave salaries and bonuses of executives and staff, it said. The company expects to save $106 million from the workforce cost reduction measures in fiscal 2014, it said. Pioneer USA executives didn’t respond by our deadline to a request for further details on the restructuring.