Taiwan's Hon Hai hopes to take larger Sharp stake
Japan's Sharp Corp. running out of options, analysts sayTOKYO — Japan's Sharp Corp. is fast running out of options to repair its disintegrating balance sheet, analysts say, raising fears about its viability as investors bolt for the exit.
The century-old consumer electronics giant suffered a bloodletting this month with its Tokyo-traded shares diving to near 40-year lows after it reported huge quarterly losses and warned of more red ink to come.
On August 3 the shares plunged by about one-third to levels last seen in the early 1970s, shaving more than $1.0 billion off the embattled firm's value.
They staged a recovery towards the end of last week, closing Friday at 209 yen, up from 181 yen earlier in the month.
Standard & Poor's quickly cut Sharp's credit rating after the results -- making it tougher to raise fresh funds -- and the producer of Aquos televisions faces a worrying cash crunch as it scrambles to re-tool its business.
The corporate overhaul includes cutting thousands of jobs from Sharp's global workforce, the first layoffs since 1950, in a bid to chop about $1.3 billion in fixed costs from its dented balance sheet.
"Sharp needs to stop haemorrhaging... Its bad performance casts doubt on cash flow, the lifeblood of a company," said Toshiyuki Kanayama, senior market analyst at Monex Securities.
Investor fears spiked when Sharp said it lost 138.4 billion yen ($1.77 billion) in the April to June quarter, nearly three times more than in the same period last year, citing falling demand for liquid crystal display televisions.
The Osaka-based firm, which began life making belt buckles and invented the mechanical pencil, warned it expected to book a net loss of 250 billion yen in the fiscal year through March 2013 -- far bigger than an earlier projection for a 30 billion yen shortfall.
The share price plunge also casts doubt on the future of a deal that would see Taiwan's Hon Hai Precision -- best known as a manufacturer of Apple gadgets such as the iPhone and iPad -- inject about $800 million into struggling Sharp and invest in one of its LCD factories.
Hon Hai's founder said he may renegotiate the deal, announced earlier this year, in the wake of the stock's plunging value.
Japan's once mighty electronics giants, including Sharp rivals Sony and Panasonic, have struggled to haul themselves out of the dire straits in which they have languished for several years.
Japan Inc. has suffered from a loss of manufacturing work to rising Asian rivals, while it has fallen behind American competitors on the cutting edge of gadgets and software.
The strong yen has made their goods more expensive overseas, while they are also beset by Japan's relatively high cost of labour, electricity, imported fuels and raw materials.
"But Sharp's performance is distinctly bad," said Nobuo Kurahashi, analyst at Mizuho Investors Securities.
"And given worsening business conditions such as the high level of the yen, it will be extremely hard for the company to build a business that is globally competitive."
In recent years, Sharp has poured money into liquid crystal displays used for flat-panel televisions, but the investment has not paid off.
"Demand for LCD televisions in developed economies has been saturated while growth in emerging markets is slowing. Falling prices for LCDs is not going to stop," Kurahashi said.
"The trouble with Sharp is that it cannot find a new cash cow... It is an extremely difficult task to build a new mainstay business which can survive intensifying global competition."
In a bid to stay alive, some Japanese firms are abandoning their traditional corporate structures in which they commit themselves entirely to the development, manufacturing and sale of their products.
"We have tried to do everything by ourselves, but the environment is tough," Sharp's incoming president Takashi Okuda said earlier this year.
In the short term, Sharp might be able to boost sales for medium and small-sized LCD panels used in tablet computers and smartphones, said Shiro Mikoshiba, analyst at Nomura Securities.
"But there is still uncertainty in terms of profitability as the purchasing power of customers is too strong" to negotiate higher prices, Mikoshiba said in a note to clients.
"Only slashing fixed costs is not enough."
s shares plunged as much as 30% Friday, its Taiwanese partner Hon Hai Precision Industry Co. said that the company hopes to pursue a larger stake in Sharp if the struggling Japanese consumer electronics maker is willing to sell more. In March, Hon Hai ...
鴻 海今年三月底宣布，以每股五五○日圓投資夏普近十％股權，台日企業合作一度傳為市場美談。但隨著夏普股價持續破底，日前公布的第二季合併淨損達一三八四億 日圓，遠高於去年同期淨損四九二億日圓，並宣布將裁員五千人，因此衝擊週五股價，盤中打入跌停板一八七日圓、股價驚見「一字頭」，單日股價重挫二十九％； 累計自鴻海入股至今，夏普股價跌幅高達六十五％。
夏 普（Sharp）第二季財報大虧一三八四億日圓，週五股價重挫二十九％，市值瞬間縮減三分之一，鴻海集團在認列投資損失下，將吃掉第二、三季獲利，股價跟 著爆量重挫。原先一直聲稱「只在意價值、不在乎股價」的鴻海集團董事長郭台銘也急了，本週親自飛往日本與夏普商談後出現大逆轉，鴻海投資夏普虧損可不認 列，入股價格將重議。
鴻海昨日下午公告，將不用履行三月二十七日以每股五五○日圓投資夏普的協議。鴻海發言人邢治平表示，近期夏普股價劇烈 波動，夏普同意鴻海無需依三月二十七日的認股協議履行其認股義務，但夏普仍將授予鴻海相同比例的認股權利，雙方合作項目仍持續進行，未來將各自依法定程序 由董事會通過增資、認股相關事宜。
近 期飽受投資利空打擊的鴻海、鴻準，在與夏普合作出現重大逆轉下，第二季已認列的帳上投資虧損，可望於第三季沖回。法人表示，夏普同意鴻海重新議價，有利於 鴻海爭取進入其董事會，協助夏普改善營運體質，鴻海投資夏普的虧損利空也將消弭，利空瞬間逆轉為利多，有助下週一鴻海、鴻準股價重回市場買盤懷抱。
由 於夏普財報及股價拖累，週五鴻海與鴻準股價同步重挫，鴻海盤中跌破八十元關卡，差一檔即觸及跌停，單日跌掉逾三四二億元市值；鴻海集團單日市值約縮水四七 五億元，瀕臨兆元保衛戰。以籌碼面觀察，三大法人週五同步賣超鴻海、鴻準持股逾二．八萬張及近一萬張，其中，外資擴大調節鴻海逾二．五萬張及鴻準約九千 張。
奧田還表示，在大阪堺市的工廠，液晶面板的生產事業由鴻海承接，目前工廠運作率僅3成左右，但今年夏天以後將提高到9成。經營堺市工廠的夏普子公司Sharp Display Product，在接受鴻海出資之後，經營基礎強化，考慮上市。
How Japan's Sharp Lost Its Edge
'We Haven't Had a Good Understanding of the Market,' Electronics Maker's Next President Explains
By DAISUKE WAKABAYASHI And JURO OSAWATOKYO—Sharp Corp.'s 6753.TO -0.78% domestic liquid-crystal-display factories once made the company a source of pride for Japan's electronics sector. Now it has taken on a less impressive mantle: Symbol of a sector struggling to compete globally.
"Severe" is how Sharp's incoming president described the situation to reporters on Monday.
Sharp expects this fiscal year to record the biggest annual loss in the company's 99-year history. The company suffered from weak demand across most of its largest product lines—television sets, LCD screens and solar panels—with a strong yen hurting cost-competitiveness.
Underscoring the difficult conditions, the world's No. 5 maker of TV sets said last week that it will replace President Mikio Katayama with Takashi Okuda, a 34-year company veteran and the head of its overseas operations.
"Even though we possess technology to make good products, we haven't been able to launch them in a timely manner because we haven't had a good understanding of the market," said the 58-year-old Mr. Okuda, who will take his new post next month. He offered little detail regarding what Sharp plans to do to halt losses.
On the heels of loss forecasts totaling ¥1.29 trillion ($15.46 billion) for the fiscal year that ends this month, Sharp, Panasonic Corp. PC +0.87% and Sony Corp. SNE -0.73% announced management changes. In each case, the new executive promised to speed up operations. All three companies, the titans of Japan's consumer-electronics industry, are suffering from losses at their TV-set businesses, failing to keep pace with the innovations of Apple Inc. AAPL +2.65% and unable to match the manufacturing might of Samsung Electronics Co. 005930.SE +1.78%
Sharp, the smallest of the trio, is especially vulnerable because of its aggressive investments in LCD and solar panels, where price competition has been brutal. Sharp also doesn't carry the brand cachet of Sony or Panasonic.
"What makes the situation really tough is that the very businesses Sharp bet on as its growth drivers are now the biggest drags on its earnings," said analyst Nobuo Kurahashi at Mizuho Investors Securities.
Sharp, whose 1915 breakthrough product was the "ever-sharp" mechanical pencil, has seen its recent fortunes rise and fall with liquid-crystal displays, a technology that Sharp first used in calculators during the 1970s.
But the good times came to a halt when the domestic TV market slumped last year after a government stimulus plan ended. Meanwhile, a global slowdown meant Sharp's customers needed fewer panels. The company was saddled with an inventory glut.
The solar business, another pillar of Sharp's operations, meanwhile is deep in the red. Since Sharp manufactures most of its solar panels in Japan, the strong yen has hurt its ability to export its panels at a competitive price. And solar-panel makers generally are facing tough conditions as low-cost Chinese manufacturers flood the market with supply. Demand in Japan hasn't met bullish projections and European sales have tapered off.
In the fastest-growing segments of the consumer-electronics industry—tablet computers and smartphones—Sharp's products haven't fared much better.
Sharp scaled back output of its Galapagos tablet less than a year after its debut. Sharp's smartphones fare well in Japan but have scant presence overseas.