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Japan-Update

Panasonic prepares to offload main security camera plant

Japanese group cutting costs in segment, shifting from hardware to software

Panasonic will focus on developing advanced facial recognition software in its security camera business.

TOKYO -- Panasonic looks to close first-round bidding in early April for the sale of a Chinese security camera factory as the company moves to cut costs in a business that has struggled to gain a foothold outside Japan.

The Japanese manufacturer contacted investment funds and other potential buyers for the core production center in the Chinese city of Suzhou. Likely candidates include U.S. equity fund Carlyle Group and British funds Permira and CVC Capital Partners. Panasonic anticipates gaining somewhere over 50 billion yen ($471 million) from the sale, and may end discussions if it does not receive an agreeable bid.

Proceeds could be applied to acquisitions in the corporate systems field or committed to other key segments like automotive batteries. Panasonic will decide later whether to put its security camera factory in Japan's Saga Prefecture on the chopping block as well.

Japanese demand for security cameras connected to the internet totaled roughly 54 billion yen in fiscal 2017, data from a research firm shows. Though Panasonic appears to control the top domestic share at roughly 40%, the company's global share wallows at a few percentage points as Chinese rivals dominate internationally.

Panasonic currently bundles the cameras with the security system it sells. To shave costs, the company later will procure those cameras from other sources, which may include the buyer of the Suzhou factory. The sale also would eliminate expenses associated with capital expenditures.

The group's security camera operation is housed in the internal company dedicated to corporate systems. Panasonic plans to raise that company's operating margin from 8.5% this fiscal year to over 10%, doing so by shifting from hardware to software such as facial recognition programs.

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