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Sony Teams Up with E Ink Holdings to Set Up Joint Venture

Zacks Equity Research

Sony Semiconductor Solutions Corporation, a wholly-owned subsidiary of Japanese conglomerate Sony Corporation SNE recently announced a joint venture ("JV") with leading papermaking company E Ink Holdings (E Ink). Officially registered in Taiwan, this JV will focus on designing, manufacturing, selling, distributing and licensing products that use electronic paper displays.

Operations are expected to commence post regulatory approvals. The JV will integrate E Ink's development and manufacturing technology with Sony’s product development and marketing expertise to create a new ePaper market. This will feature innovative electronic paper display products and systems.

Sony and E Ink has been partners since 2004 when the former started selling Digital Paper leveraging on E Ink's electronic paper display technology.  In this arrangement, Sony Semiconductor Solutions and the subsidiaries of E Ink will remain the major shareholders of the venture, investing about 70% of the JV’s shares. The residual share (30% of roughly $137.1 million of paid in capital) will be subscribed by venture capital companies scouting for budding startups.

Going forward, the JV will join forces with partner companies to create services and solutions for multiple business segments. The partners remain confident that this JV can revolutionize traditional work processes relating to documents and replace it with electronic paper displays in the future.

Of late, Sony has been making concerted efforts to strengthen its Semiconductor business which has been plagued by multiple issues — including waning demand in key markets and the Kumamoto earthquake aftermath. Last year, Sony split its storage media and semiconductor businesses and transferred them to Sony Storage Media and Devices Corporation (“SSMD”) and Sony Semiconductor Solutions Corporation (“SSS”) to attain a leaner structure and optimize operations. 

Encouragingly, in the last reported quarter, the Zacks Rank #2 (Buy) witnessed marginal recovery in its semiconductor business. It remains hopeful about better sales at the Semiconductors segment for the rest of the fiscal 2016 on account of increased demand for image sensors and timely recovery of production sites post the earthquake. Year to date, Sony’s shares have appreciated 13.9%, slightly better than the Zacks categorized Audio/Video Home Products industry’s average gain of 13.2%.

 

The company has a choppy earnings surprise history with two beats for as many misses over the trailing four quarters. It has an average positive surprise of 60.4% over the trailing four quarters. Please note that brokers are on the sidelines for the stock as its earnings estimates have remained unchanged over the month. The Zacks Consensus Estimate for fiscal 2016 has remained steady at 42 cents over the same time frame.

Other Stocks to Consider

Other stocks in the space include H&R Block, Inc. HRB, Penn National Gaming, Inc. PENN and Activision Blizzard, Inc. ATVI. All three stocks carry the same Zacks Rank as Sony. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

With three out of four beats in the trailing four quarters, H&R Block has a positive average surprise of 7.7%.

Penn National has an excellent earnings surprise history, with an average positive surprise of 67.4% beating estimates all through in the trailing four quarters.

Activision Blizzard has beaten estimates thrice over the trailing four quarters for an average surprise of 33.9%.

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