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Canon Takes on GE, Panasonic Pushes DVDs ...

by Minoru Matsutani

Canon shows off to investors it can become GE, or even better

Canon Inc., which in 2003 marked the fourth straight year of extending a record profit, wants to prove to investors that it can become another General Electric.

Just as Jack Welch, former CEO of GE, focused on businesses in which GE could be the world's best, Canon's CEO, Fujio Mitarai, scrapped the company's PC and typewriter businesses in the 90s.

In March, Canon held a press conference to show investors that it is the world's best in copiers, laser printers, digital cameras, digital video cameras and equipment for making liquid crystal displays. That the above accounts for most of Canon's businesses illustrates how Canon is following Welch's example.

Canon aims to keep its revenue and profits growing, expecting pretax income to rise 5 percent this year and 6.4 percent the next. Sales will rise 4.1 percent this year and 8.1 percent next year.

At the press conference, Canon boasted of its profitability and cost-cutting measures, announcing that its gross margin (sales minus production costs divided by sales) was 50.3 percent in 2003, the highest percentage in the past six years.

What made Canon's magic possible is continual cost-cutting efforts. Canon said in its public relations material that innovations in manufacturing methods cut production costs by JPY55 billion in 2003.

The reduction in manufacturing costs partly comes from the shift of production offshore. Asia excluding Japan accounted for 37 percent of the company's output in 2003 -- the highest percentage ever. Mostly, Canon is boosting its production figures in China.

Canon's profit-making model is to hold large shares of the printer and copier markets so that customers keep buying its toner cartridges, papers and other consumables -- the classic razor and razorblade strategy.

Canon revealed that it had a 32 percent global market share in monochrome copiers and a 22 percent share in color copiers in 2003. In laser printers, it had a 60 percent share in the black-and-white segment, while it took a 40 percent share in the color category. Canon also said that it grabbed a 17 percent share in digital cameras and a 19 percent share in digital video cameras in 2003. As for steppers, which print circuitry onto liquid crystal displays, Canon proudly declared that it had more than a 70 percent market share in 2003.

What more does Canon have to prove? It focused on No. 1 products, and is extending a record profit every year.

GE has always raced against Microsoft for the world's No.1 spot. Canon, however, was actually ranked eighth in market value in Japan as of December 31, 2003 -- a value below that of lumbering behemoth NTT! (By the way, eighth is the highest ranking ever achieved by Canon.)

Panasonic to roll out 9 kinds of DVD recorders in 3 months

If your VCR breaks now, would you buy another VCR -- or would you fork it over for a DVD recorder? And how likely are you to buy cool digital equipment by such stalwarts as Sony, Panasonic and Pioneer at your nearest Walmart or other shop? VCRs have become old and stale, and their prices have been plummeting amid competition from Korea, Taiwan and China.

Matsushita Electric Industrials Inc., the maker of Panasonic consumer electronics brands, is especially aggressive in pushing DVD-recorders. The company will launch nine different kinds of DVD recorders, all of which belong to its popular DIGA series, in the next three months. Some of the nine will be simultaneously marketed outside of Japan.

Matsushita said in a press release that industrywide DVD-recorder shipments in Japan will jump 59 percent to 3.5 million units in fiscal 2004, which will end in March 2005. The projection is not as bold as it sounds, considering strong performances in the past. Shipments numbered 180,000 in fiscal year 2001, then climbed to 750,000 in fiscal 2002 and 2.2 million in fiscal 2003, according to Matsushita.

Matsushita estimates that only 7 percent of households in Japan own DVD recorders right now, significantly lower than the penetration rate for VDRs, which is probably more than 80 percent. The 2004 Olympics, which will take place in Athens in July, are also expected to boost demand.

Six of the new DVD recorders are equipped with a hard disk drive, whose capacity ranges from 80GB to 250GB. For the sake of comparison, DVDs, which can contain a two-hour movie, hold 4.7GB of data. For the sake of price comparison, DVD recorders with a 160GB hard disk drive typically cost between JPY90,000 and JPY150,000.

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