“We need another engine for growth,” Panasonic President Fumio Ohtsubo told reporters, acknowledging that plunging gadget prices were eating away at electronics profits. “We need another pillar for far greater growth. And Sanyo was that best partner.”

While Sanyos solar panels are being used to generate electricity for homes and businesses – and are presumably going to enjoy higher demand because of climate-change fears – Panasonic does not have a solar panel operation.

Sanyo also leads in rechargeable batteries, widely used in laptops and mobile phones. Their uses are expected to grow in cars, such as hybrids and electric vehicles, as emissions standards tighten. Panasonic makes batteries for Toyota Motor Corp. vehicles, but picking up Sanyo would be key because it supplies batteries for Volkswagen AG, Honda Motor Co. and Ford Motor Co.

About half of Sanyos revenue in the first half of this fiscal year came from a category it calls components, including semiconductors, rechargeable batteries and solar technologies. Yet about 94 percent of its operating profit came from that sector. Sanyo lost money in its consumer electronics division.

Credit Suisse analyst Koya Tabata cautions that the green business is a long-term investment. But he sees it as the main positive reason for Panasonic to buy Sanyo, because it is still a fledgling sector.

A Panasonic-Sanyo deal would be part of a long-running realignment in Japans crowded electronics industry.

The shift began in the last decade as the Japanese took a hit from new rivals, often in China, that sold products more cheaply. In response, Japanese companies have sought to puff up their scale.

For example, Panasonic has a partnership in liquid crystal displays for TVs with Hitachi Ltd. and Canon Inc., countering another Japanese TV panel alliance that groups Sony Corp., Toshiba Corp. and Sharp Corp.

Yet Panasonic has a dismal track record in acquisitions. A Sanyo buyout would be a big test for Panasonic, which changed its name from Matsushita Electric Industrial Co. last month, partly because of its ambitions to become a global player.

Panasonic sank into the red and eventually had to give up on the Hollywood movie studio MCA, which it bought in 1990 for $6 billion. Its half-century ownership of Victor Co. of Japan produced results in early years and helped Panasonic beat archrival Sony Corp. in the VHS vs. Betamax video-format battle. But the partnership fizzled in the digital age, and the companies were unable to feed off each others strengths. Victor partnered last month with Kenwood Corp.

Analysts say Panasonic may have an easier time swallowing Sanyo because they share corporate cultures. Sanyo was started by the brother-in-law of Panasonic founder Konosuke Matsushita. Both companies are based in Osaka, in central Japan.

But in the long run, if Panasonic hopes to stay lean and profitable, the Sanyo name may gradually grow less visible on consumer products. Given that Sanyo is losing money in electronics but making money in its battery and solar businesses, its easy to see why those green-energy products could turn out to be Sanyos enduring mark.

Source: txhar