Hitachi Maxell, Nippon Columbia Merging US DVD Ops
August, 9 2002
NEW YORK, Aug 9 (Reuters) - The U.S. unit of Japan's Hitachi Maxell Ltd 6810.T said on Friday it will close its U.S. CD operation and merge its DVD disk production with that of Nippon Columbia Co 6791.T to cut costs and meet explosive demand.
Citing dwindling demand for CDs, an official at Maxell Corporation of America said: "Demand is shifting to DVDs from CDs. By merging our DVD unit with Nippon Columbia's, we can raise efficiency without having to invest in new facilities."
The two firms agreed on Friday to set up a joint DVD pressing plant later this month in Nippon Columbia's existing DVD facility in Madison, Georgia, to be capitalized at $500,000.
Maxell, a maker of magnetic tapes for computers and audio-visual equipment, and music software maker Nippon Columbia's U.S. unit DENON Digital, will start operations in November, the Maxell official said.
Coupled with Nippon Columbia's monthly production of 500,000 DVD disks, the two firms' monthly output capacity will jump 40 percent to 2.5 million units, the official said.
In the Unites States, DVD players have rapidly become the standard for home viewing of movies, nudging aside VCRs, whose sales have plummeted as a result. DVD disks deliver higher quality picture and sound and hours of additional footage in a much smaller format. Hitachi Maxell, a unit of Japan's electronics giant Hitachi Ltd 6501.T , will take a 60 percent stake in the joint venture.
Nippon Columbia, whose leading U.S. shareholder Ripplewood Holdings have been guiding its own restructuring process, will take the remaining 40 percent.