TV Sales Won't Save These Stocks

By Demitri Kalogeropoulos - September 19, 2012 | Tickers: AAPL, BBY, GLW, LPL, SNE | 0 Comments

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The TV industry needs a new product to sell.

According to NPD, global shipments of TVs fell again last quarter, dropping another 8%. And those awful sales figures came despite a further round of price cuts by manufacturers scrambling to clear inventory. That strategy hasn't worked so far. Sony (NYSE: SNE), for example, still reported a 30% slump in TV revenue in the last year on a 13% drop in shipments.

The problem, as struggling electronics retailer Best Buy (NYSE: BBY) delicately puts it, is "limited new product innovation" in the TV industry. While the phone and tablet markets have seen innovative leaps and bounds lately, this year's HDTV is basically the same as last year's model.  So why should customers upgrade?

NPD finds “cause for optimism” on the innovation front that points to a potential end to the sales slide. But the TV industry’s best hopes for a rebound, 3D, Smart TV, and Apple (NASDAQ: AAPL), aren't playing along with that happy scenario. And so the companies that are banking on a strong Christmas for TV sales might find a lump of coal in their 10-Ks instead.

3D falls flat

And first up as potential industry savior is the perennial favorite, 3D technology. TV producers told us that 2011 was going to be the year of the 3D television. By now we were all supposed to be wearing 3D glasses in our living rooms and dodging the action that was playing out on our big-screens.

But thanks to shaky image quality and a poor selection of broadcast content, the technology didn't catch on with consumers. And retailers that stocked their aisles with 3D displays were left holding the bag. The industry still expects 3D to eventually graduate from niche status, but not until it's more polished and likely not this year. 

That means lackluster TV sales will continue to drag down Best Buy’s numbers. And TVs won’t be a margin driver for other big retailers like Wal-Mart and Amazon for at least another holiday season.

Smart TV isn’t

In the meantime, manufacturers like LG Display (NYSE: LPL) -- which pulls half of its revenue from TV displays -- have placed new bets on the Smart TV concept to boost sales. Because people are now using their TVs to browse web pages, view photos, and stream video, the hope is that a TV that seamlessly integrates all of that technology could differentiate itself from the masses. And it would be just the sort of product to push margins up for the industry as a whole.

But Smart TVs don't look ready for prime time, either. Reviews have panned their user interfaces as "unreliable and awkward." Despite Sony, LG Display, and Samsung’s best attempts, accessing apps and content on these TVs is still an exercise in frustration. All of that has fed the expectation in the industry that there’s an apple-sized opening in the market, one that looks tailor-made for a company known for bringing innovation to huge consumer markets.

Apple’s not playing

But Apple doesn’t appear ready to swoop in and save this industry from commoditization -- at least not yet. CEO Tim Cook hinted at the potential for a future TV product when he was asked about the tech problems that Apple TV hasn't solved. Cook said that the company will "keep pulling this string and see where it takes us.” But, as we enter the crucial holiday shopping season, Apple hasn't announced anything on that score, and is bogged down in talks with cable operators. So Apple looks to be sitting this season out.

That makes a repeat of 2008, when Apple helped spark a surge in display sales that buoyed component producers, like Corning (NYSE: GLW), unlikely. While Corning saw a boost of more than 15% in its glass market in 2008, the company only expects a 9% bump in glass this year, with the TV division set to be a drag on growth. As TV sales look set to languish for another holiday, Corning has plenty of company in that regard. 

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