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Toshiba Still Struggling To Survive As Time Runs Out

Toshiba Still Struggling To Survive As Time Runs Out

Four years ago, Toshiba Australia CEO Mark Whittard was telling journalists how he was set to dominate in the notebook market, today Toshiba is struggling to survive.

Short of cash, mounting debts an accounting scandal has seen the Japanese technology powerhouse resort to selling assets to stay afloat.

Currently the Company is banking on the $18 billion-dollar sale of their memory chip business which previous customers are now deserting, as Toshiba struggles to pull together buyers for what has become a political football.

What was hoped for was that Toshiba could quickly get the business away to a government-approved consortium, however that is faltering, some bankers and potential investors are pressing the board to seriously consider alternatives, people with direct knowledge of the sale process said – including picking a new buyer.

Those people say Toshiba’s leadership is sticking to Plan A: selling the world’s second-largest memory chip maker to a Japanese government-backed group that also includes Bain Capital.

According to Bloomberg the clock is ticking for Toshiba, which was still recovering from a $1.3 billion accounting scandal in 2015 when it was hit by billions of dollars of cost overruns at its U.S. nuclear unit Westinghouse in December.

Unless it closes a deal by March, a gaping balance-sheet hole will prompt automatic delisting of its shares from Tokyo’s stock market – further battering its shareholders.

Some Toshiba executives and officials at the company’s main creditor banks say they want top management to look at other options.

“Toshiba hastily picked the consortium ahead of its [June 28] annual shareholders meeting, but more and more flaws are emerging as time passes,” said a senior official at one of Toshiba’s banks.

Scrapping that deal would leave one obvious option: rival suitor Western Digital, which bid for the chip business with private equity firm KKR. But Western Digital, already a Toshiba joint venture partner, is in a legal dispute with the Japanese firm, and sources describe a deep distrust.

But Western Digital could have the support of government-backed Development Bank of Japan (DBJ) and Innovation Network Corp of Japan (INCJ) – both currently part of the preferred buyer consortium – the sources said. They are said to be wary of SK Hynix, and of Toshiba agreeing a sale to the group while Western Digital has sought an injunction to stop it.

“If asked, we are ready to team up with Western Digital and KKR, and we prefer that,” said a senior official at one of the government investors.

Both the DBJ and INCJ declined to comment.

More locally, Toshiba Australia has reported a profit of $22.3 million for the year ended March 31, 2017, almost turning back the clock entirely on last year’s $23.1 million loss.

Regardless, it’s a strong result for a significant local player.

The bulk of the company’s $140.1 million in total revenues came down the company’s PC and medical divisions, which brought in $16.4 million and $23.7 million respectively.

The company’s local success makes for stark contrast to the events unfolding for Toshiba at large.

Chairman Shigenori Shiga recently stepped down over the disastrous cost overruns in the conglomerate’s nuclear division that have seen Toshiba in a fiscal tailspin since last year.

The company even filed for an extension to push publication of their full-year financial report to mid-August.

Toshiba’s share price has dropped over 48% since December.

 

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