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Price War Hurts Epson Inkjet Revenues
Epson Profit Down 73%
Seiko Epson has suffered a huge drop in net profit with second quarter profit falling an astonishing 73 per cent.
Reporting First Half results the company fell victim to significant declines in average selling prices for both inkjet printers and display.
Reporting a Net Loss of ¥1.16 billion for the first half to September 30 the company claimed it was forced to drop inkjet printer prices in the US by more than 10 per cent as it faced price competition from Hewlett Packard. HP and Epson are the number one and two printer vendors world wide (respectively). However, the market is moving rapidly to Colour Laser technologies which have a higher profit margin.
The second quarter results were the worst for Epson with net income falling to just ¥5.8B down from ¥21.9B in the year ago quarter. This occurred despite sales rising by 8.4 percent to ¥380B.
Seiko Epson is not just suffering in the inkjet space, price declines in the LCD market (Seiko sells LCDs used in mobile phones) have also suffered. The relevant division reported an operating loss of ¥3.0B compared to a ¥37.1B profit a year ago.
Also the LCD panels used in rear projection TVs and projector units failed to save the company, which said demand for these products in the US fell well below expectations.
Seiko Epson “equal weight”
LONDON, October – Analysts at Morgan Stanley maintain their “equal weight” rating on Seiko Epson Corp. The target price is set to ¥2600.
In a research note published this morning, the analysts mention that the company has posted its 1H05 results in-line with expectations. Seiko Epson expects the information-related segment to drive its profits in H2 on account of growth in the consumables segment in Europe and the introduction of new inkjet printers. The analysts says, however, that the information-related segment is likely to post its results short of the guidance in H2 due to limited demand for ink cartridge replacement and a decline in the company’s market share and prices in Europe.
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