Japan's Sharp Corp. running out of options, analysts say

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."


Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Sandigan OKs hospital stay for GMA co-accused
    Sandigan OKs hospital stay for GMA co-accused

    The Sandiganbayan has allowed a government official, accused with plunder along with former President and now Pampanga Rep. Gloria Macapagal-Arroyo to undergo a medical procedure at a hospital tomorrow. The anti-graft court permitted former Philippine Charity Sweepstakes Office (PCSO) board member Benigno Aguas to undergo a cardiopulmonary/endocrine clearance at the St. Luke’s Medical Center in Quezon City. …

  • Sandigan recommends executive clemency for ex-envoy
    Sandigan recommends executive clemency for ex-envoy

    The Sandiganbayan has recommended executive clemency for a former Philippine ambassador to Nigeria who was sentenced to 52 years for malversation of public funds. The Sandiganbayan First Division found Masaranga Umpa guilty of misusing the Assistance-To-Nationals Stand-by Funds totaling $80,478.80 in 2007, but the anti-graft court said the former assemblyman from Lanao del Norte should be pardoned. …

  • Stargazing at the mall highlights Earth Hour
    Stargazing at the mall highlights Earth Hour

    It was a night of stargazing in 58 SM Supermalls all over the country last night as these establishments participated in Earth Hour, an annual worldwide movement encouraging communities and establishments to switch off lights for one hour to raise global awareness of overuse of non-renewable resources. The Philippines has been an active participant of Earth Hour since 2008. Last night, in the province of Bulacan, for instance, all parishes, diocesan institutions, schools and household …

  • Payanig privatization hit
    Payanig privatization hit

    BLEMP Commercial of the Philippines, Inc. (BLEMP) denounced the recent announcement of the Presidential Commission on Good Government (PCGG) to privatize the 18.4-hectare “Payanig sa Pasig” property. In a statement sent to The STAR, BLEMP lawyer Dennis Manalo said the PCGG has no right to auction the property because it has no valid title and is not in possession. The PCGG has not paid a single centavo in real property taxes for the property, he said. He narrated that it was in the early 70s …

  • New species of tarantula found
    New species of tarantula found

    Scientists from the Museum of Natural History (MNH) of the University of the Philippines-Los Baños have discovered a new species of cave-dwelling tarantula on an island off the coast of Quezon. The new species of the spider, Phlogiellus kwebaburdeos, was described in the recent issue of the Philippine Journal of Systematic Biology by MNH curators for spiders Aimee Lynn Dupo and Alberto Barrion along with their former student Joseph Rasalan. The tarantula was discovered by Rasalan during one …

  • Palm Sunday: Do not add to suffering of others
    Palm Sunday: Do not add to suffering of others

    As Christendom enters Holy Week today, Palm Sunday, an official of the Catholic Bishops’ Conference of the Philippines (CBCP) yesterday called on the faithful not to add to the sufferings of their fellowmen. Jerome Secillano, executive secretary of the CBCP-Episcopal Commission on Public Affairs (ECPA), said that while Palm Sunday is oftentimes remembered as the glorious arrival of Jesus Christ in Jerusalem, it also signals the start of the Holy Week that tells of His suffering, death and …

  • Miriam pushes tougher graft law
    Miriam pushes tougher graft law

    Sen. Miriam Defensor-Santiago has filed a bill that would make public officials liable for violations of the Anti-Graft and Corrupt Practices Act even if they are elected to a fresh term or a new position. In filing Senate Bill 2716, Santiago sought to address what she said was the doctrine of condonation in Philippine jurisprudence brought about by the 2010 case of Salumbides vs. Ombudsman. “By merely asserting the doctrine of condonation, erring elective officials are automatically given a …

  • Phl hits back at China over sea infra work
    Phl hits back at China over sea infra work

    The Philippines assailed China yesterday for contesting Manila’s planned repair and maintenance works on some islands in the West Philippine Sea, saying they are “in no way comparable” to the Asian power’s massive reclamation activities which are in violation of international laws. “The Philippines’ possible undertaking of necessary maintenance and repairs on its existing facilities in the West Philippine Sea, over which the Philippines rightfully exercises sovereignty, sovereign rights and …


Should Aquino be held accountable over the Mamasapano operations?

Poll Choice Options