ReadWrite DeathWatch: Sharp

After 100 years of innovation, Sharp is the worst-performing company in the world. In the end, its lack of consumer focus sealed the deal.

The Basics

100 years ago, a metalworker and inventor named Tokuji Hayakawa opened his first shop in Tokyo. On the backs of his "Tokubijo" snap belt buckle and "Hayakawa" mechanical pencil (also called the "Ever Ready Sharp"), he built an industrial empire that produced Japan's first crystal radio, the world's first mass-produced microwave oven, the first LCD calculator and some of the earliest solar panels. The company's stock price peaked in 2000-2001, when the company released the first camera-equipped mobile phone and the groundbreaking AQUOS LCD televisions.

Like most consumer electronics companies, Sharp took a hit in late 2001, but it didn't recover as well as its competitors did. As market power shifted away from its strengths, Sharp began to suffer, despite maintaining technical leadership in LCD display technology. Sharp is currently the worst performing stock in the world, its credit rating has been cut to "junk" status, and its leadership has cast "material doubt" on its ability to survive. All options are on the table, and more than 60,000 jobs are at risk.

The Problem

How did things get so bad? A sluggish economy certainly played a role, and the emergence of Samsung didn't help, but in the end, it was Sharp's own lack of vision that drove the company into irrelevance.

To be fair, the Japanese economy is struggling, and electronics companies are bearing the worst of it. Panasonic, the revenue leader in Japanese electronics, has lost $16.79 billion in the past 12 months, and on November 11, Moody's cut Sony's credit rating to one step above "junk" status. A reasonably strong yen hurts exports, the television market is glutted, and Japan's domestic economy began shrinking for the first time in a year.

A weak global recovery, troubles at home, and an emergent Samsung have hurt the entire Japanese electronics sector, but Sharp is bleeding nearly three times as fast as Sony (also on the ReadWrite DeathWatch list), as a percentage of total revenue, and its prospects are far more dire. The reason is more than just poor execution. It's a lack of corporate identity.

Sharp has all but given up on its consumer brand and accepted a role as a manufacturer of commodity parts. By all accounts, Sharp makes fantastic screens ' that's why Apple sources iPhone displays from the company. But in an industry as fickle as consumer electronics, being a supplier means losing control of your own destiny. As you move down the supply chain, margins become slimmer and the ability to control your own destiny shrinks. As Samsung has shown, the only path to long-term success as a widget manufacturer is to sell them in your own products.

On paper, Sharp does just that. In practice, however, it's pretty obvious that the company is barely showing up to the fight for consumers. On its U.S. smartphone website, Sharp gives a completely unenthusiastic pitch for two of the world's least exciting phones. Highlights (pulled directly from the site) include:

• Wi-Fi
• A QWERTY keyboard
• Touch-screen navigation
• "A huge selection of downloadable Android applications."

In other words, features shared by every Android phone made by any manufacturer in the last three years. Compare that to Samsungs Galaxy S III blitz or Nokia's PureView ad campaign.

Sharp doesn't even play to its strengths very well. For all the buzz it generates with announcements like the world's biggest LED TV, Sharp has been incredibly unsuccessful branding Aquos televisions as a viable alternative to Samsung and Sony, and its oddly Sim City-esque LCD monitor microsite shows a complete lack of understanding of how to sell products - even without the typos (copyedit on "exsamples," please).

The Prognosis

Sharp's own leaders have acknowledged that it can't survive on its own. The most probable course of action is acquisition of its manufacturing assets, either through investment (like a proposed deepening of ties with Foxconn, the industry's favorite sweat shop) or a post-bankruptcy sell-off. In either case, expect to see a reduction in consumer brands produced by the company.

Can This Company Be Saved?

Given its similar ties to Apple and previous investments in Sharp, Foxconn will probably play a role in Sharp's future. The coupling could work. Foxconn's financial backing and massive labor machine, combined with Sharp's precision display expertise could create a high-quality, moderately priced television that could be perfect for a high-end consumer brand looking to make a big splash. But again, that puts Sharp's fate in someone else's hands.

 

To see more ReadWrite DeathWatches, check out the ReadWrite DeathWatch Series, which collects them all, the most recent first.

Buckle image from Sharp.com. Broken TV image courtesy of Shutterstock.