Panasonic backs $ 7 billion Blue Ionder deal over price issues

Panasonic has a long history of gains, but the Japanese conglomerate insists that buying Blue Yonder for $ 7.1 billion is worth the price, as it will help address its biggest software weakness.

Panasonic’s deal with the crisis is widespread in Japanese companies, which once flourished in the age of consumer electronics. But these became more difficult as global demand shifted to software, with huge technology companies such as Apple and Amazon emerging.

In March, Hitachi agreed to buy GlobalLogic, Silicon Valley Software Engineering Company, $ 9.5 billion.

“When it comes to digital, hardware differentiation is difficult to differentiate,” said Yasuyuki Higuchi, CEO of Panasonic, who runs his affiliate solutions business. “Obviously, we have a real sense of crisis; we need to have software.”

The former chief executive of Microsoft’s Japanese business has been in talks with him buy Blue Yonders Panasonic acquired a 20 percent stake last year when it held the board of the US Supply Chain Software Company.

Shares of Tesla battery supplier have fallen 14 percent since the deal was announced on April 23. Investors raised prices, questioning whether the Japanese group’s leadership would be able to manage such a major achievement in another industry.

Panasonic struggled with its two great achievements. Acquiring MCA, then the owner of Universal Pictures, for $ 6.6 billion in 1990, 800 800 billion for another subsidiary of smaller rival Sanyo Electric in 2011.

Analysts have also questioned the benefits of recent deals, including the $ 1.6 billion acquisition of US refrigerated showcase maker Hussmann in 2015.

“We believe Panasonic has a weak track record, especially when it comes to big deals,” said Atul Goyal, a Jefferies analyst, in a recent report.

Higuchi claims that the Blue Yonder deal breaks with the past because it invests in a software company with predictable, stable returns. The US supply chain specialist, which serves 3,000 companies, including Coca-Cola and Walmart, generated sales of $ 1 billion last year, 67% of which were regular revenue.

“With such a high recurring ratio, their revenues are largely defined as utilities,” Higuchi said. “We managed to keep the lead, so the success rate is very high.”

Still, analysts wonder what the two companies could do better with full ownership of Panasonic, which the Japanese company could not do with a 20 percent stake.

The value of Blue Yonder’s venture rose from $ 5.5 billion a year ago to $ 8.5 billion, although its revenue remained largely unchanged. Operating profit margin fell to 1.7 percent from 10 percent in the previous three years.

Panasonic executives want to expand Blue Yonder’s customer base in Japan and combine its equipment, such as security cameras and sensors, with US Group software to enhance supply chain management.

Putting the price aside, Citigroup analyst Kota Ezawa said the latest acquisition addresses the major challenges facing Panasonic.

“They need a regular business model, big software, a gateway to do business outside of Japan, so these were all things needed to stay out of the competition,” Ezavan said.

“So that fills in some of the gaps, but obviously this deal is not the whole answer to how Panasonic is moving to software-subscriber services.”

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