Word: matsushita
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Imagine if two battling behemoths like King Kong and Godzilla decided to join forces. Talk about a knockout combination. That's how the entertainment industry reacted last week to the disclosure that Japan's Matsushita Electric Industrial, the world's largest maker of consumer electronics, is negotiating to buy MCA, the American show-business giant, in a deal that could be worth more than $7 billion. The acquisition would represent an even more titanic version of the hardware-meets-software combination pioneered by Matsushita's rival Sony, which bought CBS Records for $2 billion in 1988 and Columbia Pictures...
...Matsushita (1989 revenues: $44 billion) commands an array of brands, like Panasonic, Pioneer, Technics, Quasar and JVC. The company makes products ranging from stereos to refrigerators to bicycles to semiconductors. It is twice Sony's size, and developed the VHS videocassette format, which prevailed over Sony's Beta in a bloody competitive battle...
...Matsushita is going through a mid-life crisis of its own. Growth in the electronics market has slowed from 20% in the 1970s to about 10% in the past decade. Sony's move into the more profitable entertainment industry thus presented a challenge to Matsushita. By acquiring music and movie companies, Sony gained control of the software that helps stimulate the market for electronic products. Matsushita had little choice but to do likewise. The merger faces one bothersome hurdle: while Matsushita has a cash hoard of almost $10 billion and no long-term debt, rising interest rates and a sagging...
...Matsushita faces another challenge, which is the difficulty of blending its conservative corporate culture with MCA's Hollywood approach. The clash was less pronounced for Sony, which is considered more worldly and innovative. As did Sony, Matsushita is paying for the services of a Hollywood matchmaker, superagent Michael Ovitz of Creative Artists Agency, who is acting as middleman...
Sensitive to the brewing backlash against Japanese investors, Matsushita officers are taking pains to characterize the MCA bid as a proposed "merger," a word with less aggressive overtones than "takeover." While many Japanese bureaucrats are uncomfortable about Matsushita's high-profile shopping trip, the government would not interfere with the acquisition of MCA. The Japanese know that in the 1990s hardware and software will go together like song and dance...