Sharp Watch....It's Like Playing Battleship

Here's a quote from the CEO of Sharp:

"I believe it is my responsibility to compile a new business plan as soon as possible," Sharp Chief Executive Officer Kozo Takahashi told reporters at a briefing in Tokyo on Tuesday. Sharp will present a new business plan around May, he said.

In 3 short months we'll know what's in and what's out with Sharp.  I fully expect Sharp USA to fall on the sword and tell everyone that "we'll still be here no matter what"!! 

To me the answer is simple, you can't get capital for a business unit that is losing money. You can however can much needed cash for a business unit that is pulling a profit like the copier/printer business unit.

Will the Japanese Banks lend more money to Sharp, sure they will, however you can bet dollars to doughnuts there will be many more covenants with those loans.  Plus Sharps losses are not due to re-structure, nor a stronger yen, it is because of falling sales and stiff competition.  Sharp had posted that they would make a 30 billion profit for 2014, now they have downgraded to a 30 billion yen loss. Egads!!!, that's a swing of 60 billion yen. 

With most of their properties mortgaged, and the recent sale of the US property.  I find it to fathom if we'll ever see the same Sharp. 

Art

Japan’s Sharp is making dull promises to reform, but it’s hard to see a path to recovery for the struggling electronics maker.

The company on Tuesday reported a 7.2 billion yen ($61 million) net loss in the nine months to December, and now sees a 30 billion yen net loss for the full fiscal year ending in March. That is versus earlier guidance of a 30 billion yen profit.

This is especially disappointing because it was only last fiscal year that Sharp raised fresh equity and posted a narrow net profit. That was after racking up huge losses of nearly $8 billion over the previous two years.

The lowered guidance was leaked in the Japanese press a week ago, so it was already priced into shares. Sharp’s stock actually rallied 5.6% following the results, after the company pledged to undertake “fundamental structural reform” in various business areas.

Sharp says it will reduce fixed costs, focus more on high value-added products, and so on. The company promises to offer a comprehensive plan with its full-year results announcement in May.

Investors have heard it all before. For Japanese electronics makers, the key has usually been to exit underperforming businesses outright. Panasonic , for instance, stopped producing smartphones and plasma televisions altogether, choosing to focus on business-to-businesses products like electric-car batteries and in-flight entertainment systems. Hitachi similarly exited televisions and smartphones to focus on industrial products.

The problem for Sharp is that just about all its business units are in trouble. It has no equivalent to Panasonic or Hitachi’s industrial businesses, or Sony ’s entertainment and insurance arms, to prop up profits.

Sharp’s consumer-facing gadgets like smartphones have no meaningful audience outside of Japan. Home appliances like refrigerators and TVs made around Asia for sale in Japan are suffering from the weak yen.

Sharp also makes LCD panels for smartphones and tablets, but faces intense competition from rivals in Korea, Taiwan and China, as well as domestic rival Japan Display. This segment saw operating income decline by 56% from a year earlier in the December quarter.

Granted, Sharp may be too connected to fail. Major Japanese banks have lent the company over 500 billion yen, according to Jefferies. Mizuho Financial and Mitsubishi UFJ Financial are two of its top three shareholders, and have little incentive to see it go under.

But the shares are still no bargain, trading at 1.8 times book value. That compares with an average multiple of 1.5 times over the last 10 years. Investors tempted by a possible turnaround risk getting caught on the Sharp end of the stick.

Ill try it on my Ipad later and see if I can read it that way. Looked like every link online through searches went back to WSJ.

I read it on my ipad last night, however when I went to read it on my pc.  I did not have access.

One more comment that I need to make, with the Japanese yen being weaker against the US Dollar.  Over the years I've seen that the weakening of the yen against the dollar will increase profits from Japanese manufacturers.  Thus, Sharp losing billions with this scenario is very puzzling. PLus they are mortgaged to the hilt. 

Will the Japanese banks bail them out again?  I'm thinking yes, or the Japanese government might step in as we did with GM, Chrylser, AIG.

Anyway you slice you need to sell a crap load of rice cookers to get out of this hole!

Can someone with WSJ access post the whole article by chance?

I was going to suggest that Sharp sell all other business units and keep concentrate on the copiers, imaging. But with clicks moving away, well that would not make sense either.

This may end up being a blessing for the Sharp copier division.  If the division is sold to a company with money, they could be in a more competitive situation. Their new products are very strong.  Overall, the copier division has been on a positive swing the last 2 years.

yeah, I hear ya!!  Did you read the article?!!

Art,

     I am feeling rather vindicated on my Blogs that predicted Sharps demise! We shall see!

Vince