* Sony Q2 oper profit 30.3 bln yen; keeps FY fcast for 130
bln yen profit
* Sharp Q2 oper loss 74.8 bln yen; sees FY net loss of 450
* Panasonic shares dive 19 pct, $3 bln wiped off mkt value
By Tim Kelly
TOKYO, Nov 1 Struggling Japanese TV maker Sharp
Corp warned it might not be able to survive on its own,
as it almost doubled its full-year net loss forecast to $5.6
billion, and said it was considering alliances with other
In a statement, the company said it booked massive
second-quarter losses and is seeing "serious negative operating
cash flow." "This raises serious doubts about (our ability) to
continue as a going concern," it said, adding it was taking
steps, from pay cuts and asset sales to voluntary redundancies,
to generate cash flow.
Sharp has been in talks for months with Hon Hai Precision
Industry Co Ltd about the Taiwan-based group becoming
its biggest shareholder. Sharp said on Thursday
it expected an agreement on that before a March deadline, but
added it was considering other alliances as well.
"Perhaps it will not fail within this year, but I don't
think Sharp has a viable business in the next 3-5 years," said
Tetsuro Ii, CEO of Commons Asset Management in Tokyo. "The
company hasn't got much time left and they need to cut off
businesses that they can, conserve cash and ... produce
something that's really competitive."
Sharp CEO Takashi Okuda told reporters: "We have lots of
great technology and we want to tap that asset to revive and
make money, but I can't say we are now a company with that
Bigger Japanese rival Sony Corp, which blazed a
trail in the early 1980s with its Walkman portable music
players, made a small operating profit in July-September, helped
by the sale of a non-core chemicals business, and kept its
forecast for a full-year profit of $1.63 billion.
But the maker of Bravia TVs, Vaio laptops and PlayStation
game consoles said it expects to sell fewer of its hand-held PSP
and Vita consoles this year - 10 million - than it previously
estimated. It also cut forecasts for sales of its TV sets - to
14.5 million - and compact digital cameras - to 16 million - but
kept its PlayStation home console sales estimate at 16 million,
and maintained its forecast to sell 34 million smartphones.
The grim tale from brands that led a consumer electronics
boom from the 1970s came a day after Panasonic Corp
said it will lose almost $10 billion this business year as it
writes down goodwill and assets and prepares for more
The maker of Viera brand TVs also skipped its dividend for
the first time in more than six decades and cut its full-year TV
sales forecast by more than a quarter to 9 million sets.
Panasonic shares slumped by nearly a fifth on Thursday, wiping
$3 billion off its market value.
By March, the three companies - all under new leadership
after racking up combined losses of $20 billion last year -
expect to have axed close to 60,000 jobs and are selling assets
and closing facilities.
While battling weak demand and fierce competition from Apple
Inc and Samsung Electronics, the Japanese
brands are also up against a strong yen and bumps in
China, where growth has slowed and Japanese goods have been
targetted in sometimes violent protests in a dispute over
ownership of islands in the East China Sea.
"Consumer needs have been changing and for too long Japanese
electronics firms, like Sharp, with their size and heavy
reliance on past successes, have been too slow to adapt," said
Yuuki Sakurai, CEO of Fukoku Capital Management.
WHAT WILL DRIVE SONY?
Sony CEO Kazuo Hirai has pledged to rebuild the company
around gaming, digital imaging and mobile devices, and nurture
new businesses such as medical devices, as the TV business
shrinks. In late-September, Sony agreed to pay 50 billion yen to
become the biggest shareholder in Olympus Corp, a world
leader in medical endoscopes.
"The areas in which Sony is continuing to focus are of
course high-risk, high-return markets," said JP Morgan analyst
Yoshiharu Izumi ahead of the quarterly earnings. "Although we
expect (full-year) margin improvement in electronics, we think
it's too early to appraise a sustained recovery."
Sony reported a small operating profit of 30.3 billion yen
($379 million) for July-September, after a loss a year ago, and
kept its forecast for a 130 billion yen operating profit for the
year to end-March.
"The fact that Sony managed to maintain profits shows
management's strong will and commitment to continue cost cuts
even while their product sales remain sluggish," said Takashi
Hiroki, chief strategist at Monex Inc. "Compared to Panasonic
and Sharp ... Sony's earnings should get some credit."
"But we still don't see what their major earnings driver
will be in the future."
Shares in Sony, valued at less than $12 billion, have
dropped by close to a fifth since end-June and the cost of
insuring against debt default for five years has
jumped by almost 60 percent.
Sharp, which makes Aquos TVs, almost doubled its forecast
full-year net loss to 450 billion yen ($5.63 billion) after
taking a $1.1 billion restructuring charge in July-September. At
an operating level, it sees a loss of 155 billion yen. But it
said it would make an operating profit in the current second
half - allowing its banks to justify a $4.6 billion bailout.
Sharp, Japan's leading maker of liquid crystal displays, has
secured fresh loans from banks in return for a pledge to cut
jobs, sell assets and return to profit. It has mortgaged most of
its offices and factories in Japan, including one that makes
displays for Apple's iPhone and iPad. It kept its forecast for
TV sales this year at 8 million sets.
The bank loans may prove to be just a sticking plaster
rather than a salvation, said Makoto Kikuchi, CEO at Myojo Asset
Management. "I don't think Sharp has a future. Even if it gets
by this term, financial problems could emerge again next
business year, and I don't see the banks coming to the rescue."
As it seeks survival, Sharp is further hampered by weakened
finances. At end-September, the company's shareholder equity
ratio fell to below 10 percent - half the rate generally
considered a healthy minimum.
Sharp shares have plunged more than 75 percent so far this
year, while the benchmark Nikkei average has gained more
than 5 percent. Sharp fell 1.7 percent on Thursday ahead of its
earnings release. Sony closed down 4 percent.