Matsushita Takes a Surprisingly Bold Stab at Hollywood

Matsushita Electric Industrial Co., whose late founder once compared business competition to traditional Japanese sword fighting, is carving out a new reputation for itself by pursuing acquisition talks with MCA Inc.

Long considered more conservative than better-known rival Sony Corp., Matsushita may now be seeking to shed that low-key image and step into the Hollywood limelight in a major--and potentially risky--way, experts said Tuesday.

“Matsushita has great strength in manufacturing but they are not a particularly innovative company,” said Richard Ozaroff, assistant research director for Value Line Investors Service, a New York securities research firm. “They have a lot of money but they have been very reluctant to use it for a conventional type of takeover. . . . Maybe that’s changed; maybe they are willing to take more risks.”

Osaka-based Matsushita (pronounced maht-SOOSH-tah), a far larger consumer electronics company than Sony, has prospered by honing its manufacturing skills under the trade names Panasonic, Quasar, Technics and National. Matsushita, which also owns a 51% stake in Victor Co. of Japan (JVC), produces a variety of consumer staples from personal computers and microwave ovens to irons and electric pencil sharpeners.

Those products have helped the company roll up profits of $1.6 billion on sales of $44 billion for the year ended March 31, 1990. And with about $25 billion in cash and marketable securities on hand, Matsushita spokesman Akira Nagano said Tuesday that the firm would have no trouble paying for MCA. But he said the talks with MCA are preliminary and among several deals under consideration.

Japanese and U.S. analysts point out that Matsushita has had acquisition talks with a number of parties in recent months. And there are considerable questions whether an American entertainment company could mesh with Matsushita’s conservative style.

Nagano, however, rejected the idea that Matsushita doesn’t have experience in the entertainment business--the television program and movie “software” that would complement its audio and video equipment “hardware.”

“JVC has been in the software side for some time so we have management experience even though it isn’t direct,” Nagano said. JVC recently formed a motion picture joint venture with Hollywood producer Lawrence Gordon.

He said Matsushita has recognized for some time the importance of software, particularly given the increasing competition in hardware. “Strengthening software is a key part of our strategy. Software and hardware are two wheels on the same shaft,” Nagano said. Without both wheels, he said, the company cannot advance as effectively.

He said having access to a video library like MCA’s would help sell laser disc players and videotape recorders.

MCA would not be the first acquisition of a well-known U.S. name by Matsushita. In 1974, the company purchased Motorola’s Quasar color television division.

But unlike Sony--which entered the U.S. entertainment business in 1988 when it purchased CBS Records for $2 billion, and which pioneered products such as the portable Walkman cassette player and compact disc--Matsushita has had a history of letting others take the risk in developing new markets.

In perhaps the best-known example, Matsushita sat back and let Sony develop the market for videocassette recorders, and then threw its full weight behind advancing the technology. And when Matsushita went after the VCR market, it did so with one goal in mind: to dominate.

“Business is like sword fighting in the traditional Japanese way,” the late Matsushita founder Konosuke Matsushita wrote in “Quest for Prosperity,” his 1988 autobiography. “It’s all or nothing. In business as well, if you are to be successful you must always win.”

Matsushita became a thorn in Sony’s side. Not only did it sacrifice short-term profits for a larger long-term share of the VCR market, but it did so with an incompatible VHS format that some analysts called technically inferior to Sony’s Beta format.

Matsushita followed this pattern with other products--often leaving the innovating to others, but just as often attaining the high-volume sales that made it one of the world’s biggest sellers of consumer electronics.

In fact, the slogan of Matsushita’s Panasonic unit--”Just slightly ahead of our time”--is viewed by some analysts as being a jab at Sony, which Matsushita considers too far ahead of consumers.

In the mid-1980s, however, Matsushita began to re-examine its laissez faire attitude toward innovation and new product development.

It became restless with its heavy reliance on consumer electronics, which in 1985 accounted for 60% of its sales. The company poured more money into research and development, with less of it going to consumer electronics.

Helm reported from Tokyo and Shiver reported from Los Angeles. Times staff writer Donna K. H. Walters also contributed to this story.

MATSUSHITA ELECTRIC

Headquarters: Osaka, Japan MAJOR BRAND NAMES: Panasonic, Technics, Quasar, National, JVC REVENUE (in billions):

‘88: $41.7

‘89: $39.0

‘90*: $43.5

* projected Source: Value Line

MCA

Headquarters: Universal City KEY ASSETS

Universal Pictures (film library includes “Jaws” and “E.T.”)

Universal Studios Tours (Universal City and Orlando, Fla.)

420 acres at Universal City (including studio, hotels, resaurants, Universal Amphitheater)

Yosemite Park & Curry Co.

49% of Cineplex Odeon

Geffen Records

Putnam Publishing

A2Z Best of Everything shops

WWOR-TV, Secaucus, N.J. REVENUE (in billons):

‘88: $3.0

‘89: $3.4

‘90*: $3.5

* projected Source: Value Line

POTENTIAL MCA EXECUTIVE WINDFALL

The figures below illustrate the windfall that MCA executives would realize as a result of their stock ownership and stock option plans, based on the company’s 1990 proxy report. All amounts estimated below are based on number of shares benefically owned by an individual if all scheduled stock options were to be exercised at $85 per share. In some cases, stock options depend on continued employment at the company.

Stockholder Shares Amount David Geffen 10,000,000 $850 million Capital Group Inc. 5,309,170 $451.2 million Lew R. Wasserman, 4,953,992 $421 million MCA Inc. chief executive Jules C. Stein Will 3,592,679 $305.3 million Annuity Trust Wasserman charitable 2,159,201 $183.5 million associates Sidney J. Sheinberg, 1,418,983 $120.6 million MCA Inc. chief operating officer Thomas P. Pollock, 894,240 $76 million chairman, Motion Pictures Group; MCA Inc. executive vice president Jules C. Stein Will trusts 333,464 $28.3 million Thomas Wertheimer, MCA Inc. 275,985 $23.4 million executive vice president Wasserman family trusts 195,699 $16.6 million Charles S. Paul, MCA Inc. 45,225 $3.8 million executive vice president Sheinberg charitable 27,616 $2.3 million associate MCA Inc. Profit Sharing 17,407 $1.4 million Trust Alvin Rush, MCA Inc. 15,000 $1.2 million vice president Wertheimer children 7,228 $614,380 Wertheimer charitable 4,130 $351,050 associate