The Good (If you can call it that): The main lenders and (share holders) lent Sharp another 1.4 Billion (With a B) to make it through September.
Here is this one
Sharp dropped as much as 8.1 percent to 182 yen and traded at 188 yen as of 1 p.m., extending the Osaka-based company’s decline this year to 72 percent. Hon Hai Precision Industry Co. (2317), Foxconn’s flagship company, rose to the highest level in four months in Taipei after reversing loss charges for the planned investment.
The shares that Taipei-based Foxconn agreed in March to buy for 550 yen each may instead be sold at the average price for Sharp shares, the Nikkei newspaper said yesterday, without citing anyone. Foxconn founder Terry Gou ended a visit to Japan last week without announcing a deal, and Standard & Poor’s cut Sharp’s long-term and short-term credit ratings on Aug. 31 to speculative grades, saying the ratings may be lowered further.
“Expectations that a final agreement with Foxconn was close have faded away, and the rating cuts raised concerns again for Sharp’s funding,” Tsunenori Ohmaki, an analyst at Tachibana Securities Co. in Tokyo, said by phone today.
Sharp President Takashi Okuda will visit Taiwan as early as this week to hold talks with Gou, the Sankei newspaper reported today, without citing anyone.
Miyuki Nakayama, a Tokyo-based spokeswoman for Sharp, declined to comment on the Sankei report, saying the company doesn’t comment on executive schedules. She said she was checking the Nikkei report.
Simon Hsing, a spokesman for Hon Hai, declined to comment on the Japanese media reports. Hon Hai jumped 6.6 percent to NT$90.40 as of 12:17 p.m., headed for the highest close since April 26. Foxconn Technology gained 4 percent to NT$118.50, while Taipei’s benchmark Taiex index rose 0.8 percent.
Foxconn, through Hon Hai and Foxconn Technology Co., agreed in March to buy 9.9 percent of Sharp for 67 billion yen ($856 million) in a sale of new shares. Hon Hai’s first-half results included loss provisions of NT$4.5 billion ($151 million) for the planned investment, and as the deal wasn’t approved by local authorities, it reversed the charge as of July 31, the Taipei- based company said Aug. 31. Foxconn Technology reversed provisions of NT$2.26 billion.
Hon Hai is the world’s largest contract manufacturer of electronics, while Foxconn Technology Co. makes computer cases.
Sharp is seeking to raise cash and cut costs as 706 billion yen ($9 billion) of its bonds, commercial paper and borrowings mature within one year. The company has said it will cut 5,000 jobs to help reduce fixed costs by 100 billion yen after the Japanese currency rose to a postwar high and slumping global TV demand led to a record loss last fiscal year.
Debts Coming Due
Sharp’s shares have plunged by more than half since Foxconn, through its two Taipei-listed units, agreed to purchase the stake. Hon Hai, maker of Apple Inc.’s iPad and iPhone, is Sharp’s largest supplier, according to data compiled by Bloomberg.
S&P lowered Sharp’s long-term rating two levels to BB+, the highest non-investment grade, saying the maker of Aquos televisions suffers from deteriorating market conditions and weak cash flow. The rating company also cut Sharp’s short-term rating to B, the highest non-investment grade.
The electronics maker, whose shares have had the biggest percentage decline on the MSCI Asia Pacific Index this year, was kept on a negative ratings watch.
Sharp is considering cutting bonuses as early as this winter in Japan to save between 20 billion yen and 30 billion yen, Kyodo news service reported yesterday, without saying where it got the information.
Sharp, which is waiting for a cash injection from Hon Hai Precision Industry Co Ltd <2317.TW>, said it has offered the properties as collateral for up to 150 billion yen ($1.92 billion) of credit from Mizuho Financial Group Inc <8411.T> and Mitsubishi UFJ Financial Group Inc <8306.T>.
The set of properties includes "almost all the business sites owned by Sharp in Japan," said company spokeswoman, Miyuki Nakayama.
Its two main banks have agreed to help the junk-rated company pay as much as 360 billion yen in short term commercial paper, on the condition that it puts up assets to cover the debt should it default.
Aside from its headquarters in Osaka and offices in Tokyo, the maker of Aquos TVs operates 11 factories in Japan where it assembles TVs, and makes display screens, washing machines, air conditioners, and solar panels.
Among them is the Kameyama plant in western Japan, which makes small displays for Apple and other customers. The facility has just started shipping screens to Apple for a new iPhone which analysts expect it to reveal at a press event on September 12.
Pessimism about Sharp's future has grown since Hon Hai's chairman Terry Gou last week cut short a trip to Japan, leaving without meeting Sharp executives to conclude an expected agreement for the Taiwanese company to buy a 9.9 percent stake in Sharp in return for much-needed cash.
Sharp, which wants to finish those talks as soon as possible, has said it wants to send its president Takashi Okuda to meet Gou in Taipei.
Gou, however, is stepping up the pressure on Sharp to give him greater influence by demanding a management role in the century-old Japanese firm as part of the deal.
($1 = 78.3150 Japanese yen)
(Reporting by Tim Kelly; Editing by Daniel Magnowski)
Sharp Corp. (6753), Japan’s biggest liquid-crystal display maker, put up its Osaka headquarters and some plants as collateral last week to win bank loans after its credit ratings were cut to junk. The supplier to Apple Inc. (AAPL) is also renegotiating a stock sale to Taiwan’s Foxconn Technology Group as it tries to recover from record losses and a 70 percent slump in shares this year.
Within six months of assuming office, President Takashi Okuda, 59, is firing employees for the first time in six decades after widening Sharp’s full-year loss forecast eightfold on plunging demand for TVs. Sharp’s troubles are symptomatic of what’s ailing Japanese consumer electronics companies Sony Corp. (6758) and Panasonic Corp. (6752) as they compete with TVs and phones made by South Korea’s Samsung Electronics Co. (005930) and LG Electronics Inc. (066570)
“Sharp isn’t in a situation to think about the next century,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. “It’s a matter of whether the company can survive in the next 12 months.”
Okuda must raise funds for a company that’s burning through cash. Total liabilities reached 2 trillion yen ($26 billion) at the end of June, the highest since at least 2003 -- or more than four times sales in that quarter, according to data compiled by Bloomberg.
Ratings companies aren’t making it any easier -- Moody’s Investors Service and Standard & Poor’s both downgraded Sharp’s credit ratings to speculative grade, or junk. Okuda’s efforts to raise funds by selling equity to Taiwan billionaire Terry Gou’s Foxconn group and its flagship Hon Hai Precision Industry Co. (2317) stalled after Sharp’s shares plunged to a 37-year low.
Foxconn wants a stake in Sharp to secure access to the latest technology for parts used by its biggest customer, Apple. In offering a lifeline, Gou is betting that Sharp, which invented the mechanical Ever-Ready Sharp Pencil in 1915, will continue providing it with key components for the iPads and iPhones (AAPL) that Foxconn assembles, while ensuring one of Apple’s important suppliers survives.
“If Hon Hai can’t come soon to help Sharp speed up development of products, lower manufacturing cost, improve supply-chain management, it’s probably hard to make an achievement,” Gou said in Tokyo last month. Meetings between the two companies during Gou’s visit didn’t produce a final agreement.
Gou has invested 66 billion yen of his own money into the display venture with Sharp.
Widening losses and weakening demand amid a strengthening yen is the story of Japan’s electronics companies. Sony last had a profit in the year ended March 2008, and Panasonic has been unprofitable in three of the past four years. Like Sharp, both companies changed their CEOs this year.
Investors are getting less optimistic: the $32 billion combined current market value of Sony, Panasonic and Sharp -- Japan’s three biggest TV makers -- is dwarfed by Samsung’s $163 billion and Apple’s $638 billion. Sharp’s value has fallen 92 percent from its December 1999 peak.
“The Japanese electronics industry is in a crisis as South Koreans and Chinese are catching up,” said Toshihiro Nagahama, chief economist at Dai-Ichi Life Insurance (8750) Research Institute in Tokyo. “Japan is good at making products with better performance, and that’s the easiest for newcomers to copy.”
Miyuki Nakayama, a spokeswoman for Sharp, declined to comment. The company fell 1.9 percent to 202 yen at the 3 p.m. close of trading in Tokyo.
Sharp’s troubles began when the company relied on debt funding for its LCD factories in Kameyama and Sakai, which opened in 2004 and 2009, respectively. The investment for the two factories, totaling 1 trillion yen, weighed on Sharp as LCD prices started falling and a stronger yen ruined its competitiveness against Taiwanese and South Korean companies.
The average price of a 40-inch LCD panel used in TVs fell to $250 in the first quarter of 2012, less than a 10th of the $2,772 price in the fourth quarter of 2003, according to researcher DisplaySearch.
The factory in Sakai, near Osaka, is an example of Sharp’s poor investment decisions, said Jeff Loff, a senior analyst with Macquarie Capital Securities in Tokyo. The world’s only operational 10th-generation facility, suitable for 60-inch TV panels, has been underutilized and adding to a glut since operations began in 2009.
Another mistake was converting a production line at the Kameyama plant into facilities for displays featuring the IGZO technology meant for iPads, Loff said. The transition was too aggressive, he said.
“It probably would have been wiser to wait to convert the factory until it could prove consistent supply capability at high volume,” Loff said. “The company looks to have placed too much emphasis on trying to serve Apple with IGZO tablet displays.”
Sharp, which started Sept. 15, 1912, with the invention of the snap belt buckle, is in talks with potential lenders including life insurance companies for a syndicated loan, a person with knowledge of the matter said last week. Mizuho Financial Group Inc. (8411) and Mitsubishi UFJ Financial Group Inc. (8306), Sharp’s two main banks, provided it with a short-term facility to help refinance its commercial papers, another person with knowledge of the matter has said.
The company had 706 billion yen of short-term debt maturing within 12 months and 314 billion yen in long-term debts at the end of June, according to its financial statement. Sharp’s cash and near cash stood at 218 billion yen at the time.
The plunge in share price hasn’t helped Sharp’s cause of raising equity from Gou’s Foxconn, which wants to renegotiate an initial plan unveiled in March. Gou’s group companies agreed in March to buy 9.9 percent of the Japanese manufacturer at 550 yen per share, a total bill of 67 billion yen. Separately, Sharp also sold a stake in the Sakai LCD plant to Gou for 66 billion yen to jointly run the factory.
Without Gou’s helping hand, Sharp may fail to secure financial support from banks, Kikuchi said.
“Banks may consider walking away if there is no sign of improvement in the next year,” he said.
To contact the reporters on this story: Naoko Fujimura in Tokyo at email@example.com; Mariko Yasu in Tokyo at firstname.lastname@example.org
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In addition to a 10 percent pay cut, Sharp said in a statement on Tuesday it will also halve bonuses paid to managers, while seeking union agreement to lower the salaries of rank and file workers by 7 percent for a year, deeper than a 2 percent cut agreed in May.
The latest cost-paring should save the company 14 billion yen ($179 million), adding to savings it expects from plans to trim 5,000 jobs, or a tenth of its workforce, including 2,000 redundancies in Japan. Those layoffs are the first at the firm in more than 60 years.
By resorting to pay cuts Sharp may avoid having to add to those job losses and also be able to realize swifter cash savings. Redundancies in Japan are expensive, with workers typically receiving at least a year's salary in severance pay.
For now, Sharp, which is also negotiating a cash injection from Taiwan's Hon Hai Precision Industry Co Ltd, is relying on its main banks -- Mizuho Financial Group and Mitsubishi UFJ Financial Group -- for funding.
Sharp said last week it mortgaged nearly all of its domestic offices and factories, including one which makes screens for Apple Inc's latest iPhone, to secure the fresh loans of up to 150 billion yen it needs to stay in business.
($1 = 78.2900 Japanese yen)
(Reporting by Tim Kelly and Miki Kayaoka; Editing by Michael Watson and Muralikumar Anantharaman)
quote:Originally posted by JasonR:quote:Originally posted by Yoda:
And copier division is definitely not for sale LOL! They are selling /mortgaging everything.
I can't tell if that is sarcasm or not.
Are you being sarcastic? No sarcasim see Arts latest post
The company likely will report a net loss of 295 billion yen ($3.8 billion) for the year ending March 31, according to the average estimates of seven analysts compiled by Bloomberg. Sharp last month forecast a 250 billion-yen net loss, eight times greater than originally predicted, because of its unprofitable TV and display units.
Shipments of smartphone panels were delayed after a defect was found during testing, the Osaka, Japan-based company said in August. The company also is experiencing lower-than-expected operation rates at a plant making displays for tablet computers, prompting analysts at Goldman Sachs Group Inc. and Deutsche Bank AG to lower their earnings estimates as Sharp prepares a revival plan for lenders.
“It’s possible that the company will cut forecasts,” Yasuo Nakane, a Deutsche analyst in Tokyo, said by phone. “If Sharp was to cut forecasts during the next quarter, rather than this quarter, that may cause troubles with its banks.”
Sharp’s net loss will probably total 324 billion yen this fiscal year, said Nakane, who previously estimated a 77.3 billion-yen loss.
Takashi Watanabe, a Goldman Sachs analyst, widened his estimates for Sharp’s operating loss to 161 billion yen this fiscal year, he said in a Sept. 11 report, citing lower-than- estimated panel output. The company last month projected a 100 billion-yen operating loss.
‘Harsh Business Circumstances’
Sharp said Sept. 11 it may revise earnings estimates because of “harsh business circumstances.”
“Changes in the forecasts for fiscal 2012 consolidated financial results will be announced separately once revisions are decided necessary,” the company said in a statement announcing payroll reductions.
Miyuki Nakayama, a spokeswoman for Sharp, declined to elaborate.
Sharp found a defect in its smartphone displays during a “dropping test,” Tetsuo Onishi, the senior executive managing officer in charge of accounting, said last month, declining to name the client. The defect is minor and probably won’t delay the client’s product release, he said.
“The unexpected delay in shipping suggests it would be a negative factor for Sharp’s earnings,” said Keita Wakabayashi, a Tokyo-based analyst at Mito Securities Co.
Sharp has started shipping screens for Apple Inc.’s iPhone 5, Marketwatch said today, citing an unidentified person. Hiroshi Takenami, a Sharp spokesman, declined to comment on the report. Apple unveiled the latest iPhone, which will go on sale Sept. 21, yesterday in the U.S.
Sharp’s plants making medium-sized displays also continue to be underutilized, Watanabe said. The factories may run at about 50 percent next fiscal year and 60 percent the year after, he said, lowering his estimates from 60 percent and 75 percent, respectively.
Sharp’s shares plunged to a 37-year-low after the company widened its loss forecast, prompting Foxconn to renegotiate a deal reached in March in which the Taiwanese group agreed to pay 67 billion yen for a 9.9 percent stake in Sharp. The companies haven’t announced a new agreement.
Sharp rose 1.4 percent to 212 yen as of the 11:30 a.m. break in Tokyo trading. The shares have declined 69 percent in Tokyo trading this year, making them the biggest percentage loser among more than 1,600 companies in the MSCI World Index. (MXWO)
The most pessimistic of the seven estimates for Sharp since Aug. 23 is for an annual loss of 350 billion yen, according to data compiled by Bloomberg. The most optimistic is for a 260 billion-yen loss in the year ending in March.
The electronics maker widened its full-year loss forecast from 30 billion yen. Sharp posted a 376 billion-yen net loss in the year ended March 31 as earnings were eroded by a strong yen and competition from TVs and phones made by Samsung Electronics Co. and LG Electronics Inc. (066570)
The 100-year-old inventor of mechanical pencils is seeking to raise cash and cut costs as it faces a total of 706 billion yen in bonds, commercial paper and borrowings maturing within one year. The company is cutting 5,000 jobs, its first workforce reduction since 1950, as part of plans to reduce fixed costs by 100 billion yen.
‘Recovery Won’t Happen’
Sharp is in talks with unions to cut wages and will reduce managers’ salaries and bonuses to trim another 14 billion yen in costs, it said Sept. 11. The company said last month it plans to return to operating profit in the fiscal second half, beginning Oct. 1.
“Sharp’s expected second-half recovery won’t happen,” Jeff Loff, a senior analyst at Macquarie Capital Securities in Tokyo, wrote in a report last week.
Losses from Sharp’s LCD business may total 137 billion yen this fiscal year, compared with the company’s August projection of 105 billion yen, Loff said, citing lower yields of displays using the technology known as IGZO. Those panels are thinner, have a higher resolution and use less energy than conventional models.
Sharp said last month it will improve the operation rate of its medium-size IGZO displays for tablet PCs by increasing the number of orders from large clients.
“There are risks that demand for its IGZO panels aren’t as much as the company had expected,” Deutsche’s Nakane said. “Sharp hasn’t found any other clients.”
Sharp is working on a contingency plan to present to banks as the company seeks help to refinance debt, Onishi said last week. The company has submitted a plan for returning to an operating profit in the second half and hired a specialist to evaluate assets and business plans, Onishi said.
The electronics maker is in talks with lenders including life insurance companies to raise funds through a new syndicated loan, a person with knowledge of the matter said this month.
Mizuho Financial Group Inc. (8411) and Mitsubishi UFJ Financial Group Inc. (8306), Sharp’s two main banks, provided the company with a short-term facility of 60 billion yen in July and an approximately 150 billion-yen credit last month to help the company refinance commercial papers, according to another person with knowledge of the matter.
Sharp’s liabilities reached 2 trillion yen at the end of June -- the most since at least 2003, according to data compiled by Bloomberg. The company put up its headquarters and some plants as collateral to win bank loans after its credit ratings were cut to junk by Moody’s Investors Service and Standard & Poor’s.
Sharp may have additional collateral capacity of as much as 480 billion yen, taking into account buildings and structures, machinery and equipment and marketable securities, Deutsche Bank AG analyst Akihito Murata said in a report yesterday. That may not be sufficient to cover Sharp’s more than 820 billion yen in bank loans and outstanding commercial paper as of the end of the first quarter, he said.
“We still do not believe that Sharp has sufficient fund procurement capacity,” Murata said in the report.
Loff at Macquarie downgraded the rating on the stock to underperform, or sell, from neutral, and cut the 12-month share- price estimate to 90 yen from 680 yen.
“If Sharp cannot turn around its display business, then we believe operating losses and weaker prospects for reducing debt could render the value of the equity zero,” he said.
To contact the reporters on this story: Mariko Yasu in Tokyo at firstname.lastname@example.org; Shunichi Ozasa in Tokyo at email@example.com
To contact the editor responsible for this story: Michael Tighe at firstname.lastname@example.org
Just can't seem how they can pull out of this, the only way would be a much smaller and leaner sharp. Hon Hai has still yet to pull the trigger, maybe terry is thinking he can pick up the pieces. The debt is massive.
I am going to go out on a limb and guess that the people who "get mad" when you (or someone) points out the articles about Sharp's financial problems either work for Sharp or sell Sharp products. Not wanting something to be so, doesn't make it so, "Denial" is not just a river in Egypt!
Pre-orders for Apple’s new iPhone 5 topped two million in 24 hours, more than doubling the previous record for pre-orders held by its predecessor, the iPhone 4S
Samsung supplies the iPhone 5's new A6 processor.
I would not put a fork in Sharp just yet. I would not be surprised that this forward looking data is partially why Sharp's main banks are willing to lend it the massive amounts of money that it needs to borrow.
The sales of the iphone will help in the short term, but Sharp faces much bigger challanges, they need to figure out their core business. I'm sure Sharp will return to profit, it's just a question of what their core will be and can they turn it around quick enough that they will not have to sell their profitable operations.
The sources said the talks are focused on sealing a business alliance, although they did not rule out the possibility of Intel acquiring a stake in Sharp in the future.
The jewel in Sharp's technology portfolio is the IGZO display. It consumes much less power than conventional LCD displays, is thinner as it requires less back lighting, has a highly-sensitive touch screen, and boasts very high definition.
Intel is promoting ultra-thin laptops, known as ultrabooks, to counter tablet computers from Apple Inc. Earlier this year, the U.S. chipmaker signed deals with several panel makers to ensure adequate supplies for a wave of ultrabooks with touch screens expected to hit the market following Microsoft Corp's launch of Windows 8 in late October.
Sharp is expected to complete it's revival plan within days to present to the banks, which will decide to provide about 200 billion yen in additional loans, the sources said. The plan includes the sale of its U.S. solar power unit Recurrent Energy bought in 2010.
As the Malaysian plant has around 2,000 workers, the job cuts by the cash-strapped Osaka-based company will total around 10,000, including already announced workforce reductions.
Sharp has almost decided to sell its TV assembly plants in Mexico and China to Hon Hai to focus on more lucrative fields, such as small and midsize liquid crystal displays for smartphones and tablet computers.
The Japanese company had around 56,000 employees on a consolidated basis as of the end of July. It has already announced a job cut of 5,000, and the planned sales of the Mexico and Chinese plants will bring about more than 3,000 reductions.
Sharp is expected to present its rehabilitation plan to its lenders by the end of this month.
quote:Originally posted by Art Post:
Sharp teams up with SHI International Corp. of New Jersey
Creating expanded channel opportunities, Sharp and SHI are collaborating in a first-of-its kind alliance in the imaging industry, to bring SHI clients access to Sharp's full line of world-class imaging products. SHI is known for leveraging the broadest portfolio of IT products and solutions available, on a global scale. In this alliance, SHI will build on its reputation within the services industry, and significantly expand its product portfolio to all partners, including many Fortune 500 companies.
"Expanding channel opportunities, such as through our relationship with industry leader SHI, is a key component of our growth strategy," said Rich Boomsma, senior vice president, sales, Sharp Imaging and Information Company of America. "This collaboration will enable Sharp to provide broader access to large corporations for our dealers and channel partners."
SOURCE Sharp Electronics Corporation
BY ATSUKO FUKASE
TOKYO—Sharp Corp. has submitted a new restructuring plan to its lenders setting out job cuts of more than 10,000 and the sale of assets including overseas plants, as the consumer-electronics maker seeks to convince banks it can return to profitability even without a planned cash infusion from Taiwan's Hon Hai Precision Industry Co.
A person briefed on the plan also said Tuesday that Sharp is in talks with Intel Corp. over a business tie-up involving the provision of small and midsize liquid-crystal-display technology, though this wasn't mentioned in the plan.
Under the plan, Sharp intends to cut wages while offloading ...
Sharp makes no mention of selling its copier business!
quote:Originally posted by SalesServiceGuy:
Sharp makes no mention of selling its copier business!
quote:Sharp Corp's (JP:6753)(US:shcaf) lenders are expected to approve funding that will enable the firm to stay afloat through the current fiscal year,
So, this is a good thing? That they have enought money to0 stay afloat until April 1st, 2013?
quote:Originally posted by Yoda:
Do you think there was any mention to Recurrent Energy prior to them selling it?quote:Originally posted by SalesServiceGuy:
Sharp makes no mention of selling its copier business!
Heck in todays article they don't even mention they have one.
The two banks have been orchestrating Sharp's funding plans in exchange for drastic changes at the century-old firm, including selling overseas TV assembly plants and shutting solar panel businesses in Europe and the United States.
Sharp, which produces air conditioners, microwave ovens and Aquos TVs, expects to lose more than 100 billion yen this business year, sources say, savaged by competition from rivals led by South Korea's Samsung Electronics.
The 210 billion yen of lending to be shared between its two key banks will come on top of 150 billion yen of loans already made to Sharp, which must repay as much as 360 billion yen of short-term commercial paper over the coming months.
Mizuho and Bank of Tokyo-Mitsubishi UFJ (BTMU), a core banking unit of Mitsubishi UFJ, want other firms including Resona Holdings to take over half of those 360 billion yen loans, said the sources, who had been briefed on the matter but declined to be named.
Sharp, Mizuho and Mitsubishi all declined to comment.
Sharp's shares closed down 3.9 percent on Thursday, compared with a 0.4 percent rise in Tokyo's benchmark Topix index.
The firm has already mortgaged most of its offices and factories in Japan, including one that makes displays for Apple Inc.'s iPhone and iPad, and it needs to convince banks it can return to profit in the next business year in order to unlock additional financing.
Sharp spent heavily to build the world's most advanced liquid crystal display plant in Sakai, western Japan, which started work in 2009. Losses sustained there undermined the business, and last month ratings agency Standard & Poor's downgraded the company's debt to junk.
In the business proposal submitted to lenders, Sharp predicted it can achieve an operating profit of 121 billion yen in the year beginning April 1, compared with an operating loss of 115 billion this term, the sources said. Given the uncertainty of sales picking up, much of the turnaround plan is based on cost cutting.
"We cannot count on revenue growth. We are making the plan under the worst-case scenario," said a senior banker at one of Sharp's main banks last week.
As part of that plan, Sharp would shut solar panel module assembly plants, one in the United States and one in Britain, the sources said. The company would also need to dissolve a partnership with Italy's leading power producer Enel SpA, which last year opened a joint panel production plant.
Sharp, which a decade ago was the world's leading maker of solar panels with around a fifth of the market, also plans to consolidate production at several Japanese sites into one location.
Other cost-cutting measures and asset sales Sharp has proposed include the sale of overseas TV assembly plants. Sharp is already in talks to sell plants in Mexico and China to Taiwanese partner and fellow Apple supplier Hon Hai Precision Industry Co. The two companies jointly operate a TV display plant in western Japan.
Sharp has also offered to sell a third assembly plant in Malaysia. Removing the workers at those sites from its payroll would, when added to 5,000 planned layoffs, shrink the company's workforce by more than 11,000 people, or by about a fifth.
The company is also asking its remaining workers to accept pay cuts as steep as a tenth of their salary.
Talks to sell a 9.9 stake to Hon Hai, a sale which would make the Taiwanese company its biggest shareholder, have, however, stalled after an agreement had been expected in August. Hon Hai has said it wants a management role in return for its cash.
Sharp has denied a local report that it is in talks to make Intel Corp its biggest stockholder instead, but sources have said it is in talks to supply panels for ultra-thin laptops that typically use processors made by Intel.
($1 = 77.7800 Japanese yen)
(Reporting by Reiji Murai, Nobuhiro Kubo, Taro Fuse and Taiga Uranaka; Editing by Daniel Magnowski)
In addition to establishing a joint company to produce and market LCD panels--a sector seen as Sharp's main source of revenue--the Taiwan firm is also demanding the Japanese company accept board members from Hon Hai, sources said.
Sharp is in talks with Hon Hai over the former's proposal that the Taiwan firm take a 9.9 percent stake in the electronics maker. In connection with the proposal, Hon Hai demanded Sharp spin off its LCD business, but the company appears reluctant to agree.
Under the circumstances, the direction of the tie-up negotiations between the two firms--key to Sharp's reconstruction--is becoming more uncertain.
Sharp's small and midsize LCD business is key to its rehabilitation.
Under its rehabilitation plans, Sharp aims to expand production of panels for tablet devices, such as Apple Inc.'s iPad, at its factories, including its plant in Kameyama, Mie Prefecture, where small and midsize LCD panels are manufactured. The company hopes to turn its earnings around to realize a net operating profit of 121.2 billion yen in fiscal 2013.
Meanwhile, Hon Hai's founder has taken an individual 37 percent stake in Sharp's Sakai plant in Sakai, Osaka Prefecture, equal to Sharp's stake in the factory.
If Hon Hai gains a stronger voice in the production of large LCD panels, as well as small and midsize ones, it is feared Sharp's management identity may be further chipped away.
In parallel with the talks with Hon Hai, Sharp began negotiations with Intel Corp. to see if the major U.S. semiconductor manufacturer will buy convertible bonds worth tens of billions of yen, hoping to conclude the talks by the end of this month.
Sharp also is mulling jointly developing Intel's Ultrabook, a light notebook-sized personal computer equipped with Sharp's unique state-of-the-art LCD panel, IGZO, and an Intel semiconductor.
Sharp is also in negotiations with several U.S. IT companies to sign long-term contracts to supply its LCD panels.
Partnership with 3 firms key
Sharp's future depends on how smoothly it can enhance its relationship with the
three foreign companies.
Its rehabilitation plans were compiled late last month on the assumption that the Japanese maker will have stronger ties with Hon Hai, Intel and Apple.
Sharp sees its small and midsize LCD business as its main revenue source in the future because it expects to boost supplies for Apple's products and gain new orders for PCs, which would be generated through a tie-up with Intel.
If the number of orders from Apple turns flat, or tie-up talks with Intel do not conclude in the way Sharp hopes, the Japanese maker will lose important sales channels, making it difficult for the company to reconstruct its business.
Sharp needs to improve its financial structure with funds from Hon Hai and Intel while securing sales channels to turn itself around.
In July, Sharp began jointly operating its Sakai plant with Hon Hai, which resulted in stopping the deterioration in the earnings of its large LCD screen business for now.
(Oct. 7, 2012)
The following appears on businessweek.com
Sharp Corp. (6753), the Japanese electronics maker on course to post a second straight full-year loss, dropped to the lowest level in at least 38 years in Tokyo trading after Goldman Sachs Group Inc. cut its rating to sell.
Sharp slumped 15 percent to 151 yen, the lowest since at least 1974. The stock was the biggest loser on the benchmark Nikkei 225 (NKY) Stock Average, which fell 1.1 percent. Japanese markets were shut yesterday for a public holiday.
The maker of Aquos televisions may need to issue new stock to raise funds, eroding shareholder value, Goldman Sachs analysts led by Takashi Watanabe wrote in a report on Oct. 6. Goldman Sachs, which cut the stock’s rating from neutral, also reduced Sharp’s 12-month price estimate by 31 percent to 120 yen because of expectations that earnings per share will be diluted by about 50 percent with the new stock.
“Even assuming continued financial support from its banks, we are more convinced Sharp will need to issue fresh equity,” Goldman Sachs wrote in the report. Sharp’s equity-to-asset ratio “could deteriorate further if more inventory valuation losses or fixed-asset writedowns emerge,” the brokerage said.
Sharp isn’t in a position to comment on the views of Goldman Sachs, Miyuki Nakayama, a spokeswoman at the Japanese company, said by telephone today.
The company will need to book 106 billion yen ($1.4 billion) of unrecognized pension reserves next fiscal year, trimming the equity ratio to 4 percent at the end of March 2014, Goldman Sachs said. That compares with about 24 percent in the year ended March 31, the report showed.
Mizuho Corporate Bank Ltd. and Bank of Tokyo-Mitsubishi UFJ Ltd. plan to send executives to Sharp, the Asahi newspaper reported yesterday. The lenders, based in Tokyo, are selecting the executives and plan to discuss the matter with the company, the newspaper reported, without saying how it obtained the information.
The maker of Aquos TVs secured 360 billion yen ($4.6 billion) of funding from Mizuho and Bank of Tokyo Mitsubishi- UFJ, it said Sept. 28, after submitting cost-cutting proposals to the banks earlier. Sharp has also been renegotiating a proposed stake sale to Taipei-based Foxconn Technology Group after widening its full-year loss forecast eightfold in August, triggering a slide in its share price. The talks may continue until March, Sharp said last month.
Miyuki Nakayama, a spokeswoman for Sharp, wasn’t immediately able to comment on the Asahi report.
Calls to Bank of Tokyo-Mitsubishi UFJ’s press officials and spokesman Shinya Matsumoto’s mobile phone were unanswered. A phone call to Mizuho Financial Group Inc. (8411) spokesman Masako Shiono’s office wasn’t answered.
The Asahi report didn’t say how many executives may be sent to Sharp or what posts they may take.
Sharp rose 4.8 percent to 153 yen at the close of Tokyo trading Oct. 12. The stock dropped 4.6 percent the previous day to 146 yen, the lowest level since November 1971, according to Nakayama, the company spokeswoman. The shares have slid 77 percent this year, the worst performer on Japan’s benchmark Nikkei 225 (NKY) Stock Average.
Sharp will get a 180 billion yen loan from Bank of Tokyo- Mitsubishi UFJ, a unit of Japan’s largest banking group by market value, and Mizuho Corporate, a unit of the No. 3 group, the company said Sept. 28. Another 180 billion yen in the form of a revolving credit facility due in June will also be extended to Japan’s biggest maker of liquid-crystal displays.
The TV maker may consider raising new funds, because it needs money for growth and to regain the trust of the market, a senior executive at the company said in Osaka, Japan, on Oct. 12. The executive declined to be identified, citing company policy.
The electronics company presented a revival package to its main banks that included cutting more than 10,000 jobs, or 18 percent of its workforce, and selling overseas plants as well as U.S. solar developer Recurrent Energy LLC, people with knowledge of the proposal said Sept. 26.
Sharp on Aug. 2 forecast a loss of 250 billion yen for the 12 months ending March 31.
Foxconn, led by billionaire Terry Gou, agreed in March to invest 67 billion yen for a 9.9 percent stake in Sharp at 550 yen a share. Under the agreement, the transaction was to be completed by March 2013. Sharp turned to Foxconn, whose Hon Hai Precision Industry Co. unit makes Apple Inc. iPads, in an attempt to restructure its money-losing LCD business.
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The average ratio of reserves for delinquent debt at 84 lenders on the Topix Banks Index (TPNBNK) has dropped to 1.4 percent of total loans, the lowest in at least 12 years, according to data compiled by Bloomberg based on the latest filings. That’s less than half the level in 2000, when the industry was emerging from a financial crisis, and is smaller than the 1.85 percent average for 24 U.S. lenders on the KBW Bank Index. (BKX)
Banks including Mizuho Financial Group Inc. (8411) are lending to non-investment grade companies such as Sharp to widen record-low net interest margins after cleaning up bad debts that peaked at 43 trillion yen ($542 billion) in 2002. The danger is that borrowers will fail to turn that credit into profit, boosting default risk and eroding bank earnings already under pressure from losses on their 16.2 trillion yen of stock holdings.
“The severe environment surrounding the electronics industry could increase banks’ credit costs to some extent,” said Takayuki Atake, chief credit analyst at SMBC Nikko Securities Inc. in Tokyo. “Impairment losses from stocks, in particular of electronics-related equities, will have a big impact on the earnings of banks like Mizuho.”
Japanese electronics makers including Sharp and Panasonic Corp. are reeling from increased global competition, slowing economic growth and a yen rate that’s 5 percent from a postwar high against the dollar. The government has downgraded its view of the world’s third-largest economy for three straight months as exports weaken. Overseas shipments fell more than economists forecast last month, government data showed today.
Sharp secured 360 billion yen of funding from units of Mizuho and Mitsubishi UFJ Financial Group Inc. (8306) last month after the television manufacturer pledged to cut more than 10,000 jobs and sell plants. Panasonic, which is trying to recover from a record annual loss, said Oct. 16 that it got 600 billion yen in credit lines from lenders including Sumitomo Mitsui Banking Corp. and Bank of Tokyo-Mitsubishi UFJ Ltd.
Mizuho, Sumitomo Mitsui and Bank of Tokyo-Mitsubishi are also lending about 1.5 trillion yen to Softbank Corp. (9984) for the wireless operator’s $20 billion bid to buy control of Sprint Nextel Corp. in the biggest publicly announced outbound acquisition by a Japanese company since at least 2000. Moody’s Investors Service and Standard & Poor’s have said they may cut Softbank’s credit rating because of the deal. Moody’s rates Japan’s third-biggest carrier one level above junk and S&P has it at the second-lowest investment grade.
“Domestic factors alone won’t raise banks’ credit costs,” Japanese Bankers Association Chairman Yasuhiro Sato said at a news conference on Oct. 18. “However, we must closely watch any impact on Japanese machine-parts makers and smaller businesses from any adverse effects abroad,” said Sato, who is also chief executive officer of Mizuho.
The bursting of Japan’s real estate and stock bubble more than 20 years ago led to the collapse of Yamaichi Securities Co. and Hokkaido Takushoku Bank and prompted other lenders ridden with bad debts to form the three so-called megabanks that exist today. Non-performing loans reached a record 43.2 trillion yen as of March 2002, according to Financial Services Agency data.
Banks’ provisions for bad debts peaked at 15.5 trillion yen in May 2000, Bank of Japan figures show. They have pared reserves since then, setting aside 4.95 trillion yen as of August, close to a record-low 4.85 trillion yen in March.
Elsewhere in the domestic credit markets, Shinsei Bank Ltd. sold 6.4 billion yen of 10-year subordinated bonds. The Japanese lender partly owned by J. Christopher Flowers priced the notes to yield 4 percent for the first five years, after which the charge switches to 3.61 percentage points more than the five- year yen swap rate, according to data compiled by Bloomberg.
Sekisui House Ltd., the Osaka, Japan-based home builder, hired banks for an offering of about 20 billion yen of five-year notes, according to a statement from Mitsubishi UFJ Morgan Stanley Securities Co., which is managing the deal together with Mizuho and SMBC Nikko.
Japan’s corporate bonds have handed investors a 1.4 percent return this year, compared with the 1.7 percent gain for the nation’s sovereign debt, according to Bank of America Merrill Lynch data. Company notes worldwide have gained 9.8 percent, according to the data.
The Markit iTraxx Japan index of credit-default swaps for 50 companies declined 15 basis points last week to 208 on Oct. 19, after falling to the lowest since Sept. 19 the previous day, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. A decrease in the contracts signals improving perceptions of creditworthiness, while an increase suggests the opposite.
Yields on Japan’s benchmark 10-year government bonds gained 1 1/2 basis points compared with Oct. 12 to 0.78 percent today. The securities yielded 98 basis points less than similar maturity U.S. Treasuries, versus 114 basis points a year earlier.
The yen traded at 79.33 per dollar at 9:54 a.m. in Tokyo, after weakening 1.1 percent last week. The Japanese currency strengthened to a post-World War II record of 75.35 on Oct. 31.
Japan’s exports slid 10.3 percent in September from a year earlier, the Finance Ministry said in Tokyo today. Economists expected a 9.9 percent export decline, according to median forecasts in surveys by Bloomberg News. A rising yen erodes exporter profits by making their products more expensive abroad and reducing the value of repatriated earnings.
Japanese lenders are also vulnerable to losses from stocks they hold as part of a culture of companies taking stakes in each other to cement ties. Banks have been sluggish in paring their shares of allied enterprises, according to Naoko Nemoto, a director of financial institutions ratings at S&P in Tokyo.
“The slow pace of unwinding cross-shareholding is keeping the risk of equity volatility intact for megabanks,” Nemoto said. Stricter bank capital rules developed since the global financial crisis “will perhaps prompt them to accelerate the pace of cutting allied shareholdings to mitigate the risk.”
Mizuho, the nation’s third-biggest bank by market value, said on Oct. 5 that it will book 173.7 billion yen in losses relating to declining values of its domestic stock holdings in the three months ended Sept. 30. Mizuho’s corporate lending unit has shares in Sharp, which has tumbled 76 percent this year, the worst performance among 1,672 companies on the Topix Index.
“Declines in Japanese electric utility and electrical appliance manufacturer stocks fueled the losses, and we expect the other megabanks to experience similar results,” Moody’s wrote on Oct. 11. The portfolio losses are credit negative for the three banks, it said.
Japanese lenders’ stock holdings fell to 16.2 trillion yen in August from 17.5 trillion yen a year earlier and a peak of 47.9 trillion yen in October 1997, Bank of Japan data show.
The emergency loans to Sharp signal that “banks in general aren’t easily able to cut transactions with big corporate clients even if their creditworthiness deteriorates,” said Shinichi Ina, a Tokyo-based analyst at UBS AG. “Blue-chip companies can suddenly get in trouble due to changes in the business environment, and banks still rely on domestic lending as their main source of revenue.”
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The loss is nearly double the 210 billion yen ($2.63 billion) the company had projected in August, the Japanese daily said.
Sharp, which has been hit by a steep decline in demand for LCD televisions and panels in recent times, had projected a 250 billion yen ($3.13 billion) group net loss for the full year. It may have to widen this projection on account of the worse-than-expected half-year results, the daily said.
The company, which reported an interim net loss of 39.8 billion yen ($499 million) last year, decided to cut 10,000 jobs in September to secure loans, the financial daily said.
Sharp is looking to generate an operating profit in the October-March half and return to the black in the full year through March 2014, the Nikkei reported.
($1 = 79.8250 Japanese yen)
(Reporting by Avik Das in Bangalore; Editing by Roshni Menon)
The shares dropped as much as 6.6 percent to 156 yen, headed for the biggest decline since Oct. 9, and traded at 159 yen as of 9:54 a.m. Sharp said Aug. 2 it may post a 210 billion- yen net loss for the six months ended Sept. 30.
Sharp is cutting jobs and selling factories, and has turned to lenders to refinance debt as it heads for a second straight year of losses amid slumping demand for TVs and a strong yen that’s eroding overseas earnings. The company may take 200 billion yen in charges for losses on LCD panels and other inventory, a writedown of deferred tax assets and restructuring costs, the Nikkei said, without citing anyone.
“A net loss that big may raise concerns about the company’s cash position,” Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo, said of the report. “We may have to watch out for how much cash is left at the company at the end of the first half, and whether bridge loans from banks will be enough to refinance commercial papers.”
Sharp will probably revise its earnings forecasts for the year ending March 31, the Nikkei said. The company’s sales and operating loss for the first half may be in line with current company forecasts, the report said.
Atsushi Yoshida, a spokesman for Sharp, said the company isn’t the source of report. The Osaka-based company is scheduled to report earnings on Nov. 1.
The average of four analyst estimates compiled by Bloomberg is for a 215 billion-yen first-half net loss.
Sharp is cutting more than 10,000 jobs and selling overseas plants as well as U.S. solar developer Recurrent Energy LLC in an attempt to return to profit next fiscal year, people with knowledge of the plans said Sept. 26. The company presented a revival package to lenders that included asset sales and job cuts as it sought 360 billion yen in loans, the people said.
The maker of Aquos TVs turned to lenders for support as it struggled to refinance debt after Standard & Poor’s and Moody’s Investors Service cut its credit ratings to junk.
The company had 706 billion yen of short-term debt maturing within 12 months, according to its latest quarterly financial statement. Sharp’s cash and near-cash stood at 218 billion yen at the time.
The electronics maker has been renegotiating terms for a proposed stake sale to Taipei-based Foxconn Technology Group after widening its full-year loss forecast eightfold in August, triggering a slide in its share price. Foxconn agreed in March to invest 67 billion yen for a 9.9 percent stake in Sharp at 550 yen a share.
Sharp aims to return to profit next fiscal year with the help of job cuts and cost reductions, President Takashi Okuda said Sept. 14. The company is planning to reduce wages, managers’ salaries and bonuses to lower costs by 14 billion yen, it said earlier this month.
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"And high on Japan Inc's list of worries this earnings season is what Canon and others are referring to as "China risk".
Almost half of Japanese manufacturers expect to see lower sales in the current fiscal year due to the spike in tensions between Asia's two largest economies, while nearly one-quarter said they were considering delaying or reducing planned investment in China, according to a Reuters Corporate Survey released on Wednesday."
Japanese companies are now cutting their full year earning due to the China Risk and the deepening debt crisis in europe.