Panasonic Allies with LodgeNet - Analyst Blog

Panasonic Corp. (PC) entered into a licensing agreement with LodgeNet Interactive Corp. (LNET). LodgeNet is a leading provider of unique media and connectivity solutions.

To serve the hospitality industry, Panasonic will integrate LodgeNet's b-LAN (broadband local area network) technology into its new LRU20 series high-definition (HD) television displays.

Under the agreement, Panasonic will install LodgeNet's patented b-LAN technology into its televisions (TVs). This will provide users with cost effective solutions for interactive content and functionality, such as centralized channel management (through LodgeNet's Free-to-Guest Management Appliance), video on demand content and interactive guest services.

Panasonic TVs can be centrally operated as networked devices rather than unconnected, stand-alone units using LodgeNet's b-LAN technology solution, the company stated. This means that the b-LAN technology will enable hoteliers to configure TV functions centrally without having to visit each room separately. This will reduce cost considerably.

Panasonic aims to strengthen its competitive edge by providing economical solutions and enhancing its product and marketing services, which will eventually make its flat-panel TV business profitable under its mid-term management plan.

Panasonic plans to produce 30 million units of flat-panel TVs in fiscal 2013, compared with 15.8 million units produced in fiscal 2010. Of the 30 million units, the company intends to produce more than 11 million units in the emerging markets.

Moreover, Panasonic plans to increase the ratio of 3D TVs to 70% of the total flat-panel TVs in fiscal 2013, thereby strengthening its flat-panel TV business. For LCD TVs, the company will give priority to its LED-backlight TVs, which it plans to launch this year.

Additionally, Panasonic will build up its healthcare, security and LED (excluding LED backlight TV) businesses, aiming to generate combined sales of 1 trillion yen in fiscal 2016, ending March 2016. For fiscal 2013, the company targets 540 billion yen in sales from these three businesses.

The agreement with LodgeNet Interactive will enable hoteliers to reduce their HDTV implementation costs given that any external communications hardware will not be required once the Panasonic TVs are embedded with LodgeNet's b-LAN technology.

In our view, Panasonic will achieve steady growth from its partnership with LodgeNet that will allow it to provide users with various HDTV options at a much lower cost. This will shoot up the sales for its HDTV by increasing its user base.

We believe the strength of this partnership will also help the company to reach its mid-term management plan of selling increased number of TVs in the current year.

However, Panasonic faces stiff competition from Sony Corp. (SNE) and Samsung in the audiovisual market. We believe that lowering the cost of production and components in this environment of increased competition will play an increasingly pivotal role in increasing market share.

We believe Panasonic is well positioned to achieve growth with superior picture quality, lower component cost and enhanced features for its products.

We have a Neutral rating on the stock.

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