Toshiba Mulls Sale of Stake in Chip Arm
28 November 2015 - 12:50AM
Dow Jones News
TOKYO—Toshiba Corp. on Friday said it is considering selling
part of its semiconductor business to raise financing in response
to a drawn-out accounting scandal.
Toshiba Chief Executive Masashi Muromachi said the company is
weighing the sale of a stake in the chip arm via a stock-market
listing or a transaction with another company. The semiconductor
business has been the main moneymaker for Toshiba in recent years,
as the fortunes of its personal-computer, consumer-electronics and
nuclear-operations have worsened.
Mr. Muromachi said at a news conference that Toshiba would keep
control of the chip arm, and he added that no sale is imminent. "It
is a core business for us, so we won't completely detach the
business from the group," he said.
Toshiba sells memory chips to Apple Inc. and other smartphone
makers, but the semiconductor business requires continuous
investment to maintain its competitiveness against rivals such as
Samsung Electronics Co.
In the wake of the accounting scandal, Toshiba's ability to
raise funds has been squeezed. The company says it overstated
profits by ¥ 155 billion ($1.3 billion) over seven years. Toshiba
shook up its management and board this summer in response, but
disclosures have continued to trickle out.
Toshiba earlier this month said its U.S. nuclear unit,
Westinghouse Electric Co., booked $1.3 billion in previously
undisclosed impairment charges for the 2012 and 2013 fiscal years.
Though many analysts expect Toshiba to take a similar write-down to
reflect the Westinghouse charges, executives on Friday reiterated
that they saw no need to do so.
In the most detailed explanation to date of Westinghouse's
financial situation since the accounting problems came to light
earlier this year, Toshiba said the U.S. unit has incurred a
cumulative operating loss of $290 million since Toshiba bought it
2006. Previously, Toshiba had said Westinghouse was profitable,
without specifying a time frame.
Toshiba said its nuclear-fuel and plant-maintenance business
remains profitable, and said the area is likely to grow as the
number of active nuclear power plants increases globally. Demand
for new plants has collapsed since the Fukushima disaster in Japan
in 2011, but Toshiba officials said it should rebound as global
demand for cleaner energy rises.
"There is no way the U.S. can meet its clean-energy projections
and not increase its nuclear power generating capacity,"
Westinghouse Chief Executive Danny Roderick said in an
interview.
Toshiba said it is also aiming to take on
reactor-decommissioning projects, which should bring additional
revenue.
Analysts expressed skepticism about Toshiba's plans for
Westinghouse, saying they may be too optimistic. For the fiscal
year ending in March, Toshiba expects to book an operating profit
of ¥ 30 billion from its nuclear business. It hopes to post an
average operating profit of ¥ 150 billion a year from fiscal 2018
through 2029.
"The presented business outlook is unrealistic in many aspects,"
said Hideki Yasuda, an analyst at Ace Research Institute. "For one,
Westinghouse would need to hire a whole lot of workers to achieve
the plan."
Mass hires might be unrealistic when Toshiba is focusing on
cuts. The Tokyo Stock Exchange has placed Toshiba on a watch list,
making it difficult for the company to issue new shares or
debt.
In addition to the possible sale of a stake in the semiconductor
arm, Toshiba has been trying to sell a stake in Westinghouse.
Mr. Roderick said Toshiba wanted to maintain control of
Westinghouse and would limit any such transaction to the 20% stake
that Toshiba acquired from Shaw Group Inc. in 2013. But he said
Toshiba was struggling to find a buyer that would be willing to
accept a minority share.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Eric
Pfanner at eric.pfanner@wsj.com
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(END) Dow Jones Newswires
November 27, 2015 08:35 ET (13:35 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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