February 15, 2017 6:40 am JST

Nuclear loss sends Toshiba scrambling for turnaround plan B

Pivot to infrastructure in the cards as nuclear operations melt down

A Toshiba chip fabrication facility in Yokkaichi, Japan.

TOKYO -- President Satoshi Tsunakawa's two-year push to get Toshiba back on its feet after an accounting scandal has fallen apart due to a massive write-down in the key nuclear business, forcing him to look into less palatable options.

Staffers at headquarters here were shocked Tuesday evening by an internal announcement by Tsunakawa explaining that the company would no longer insist on keeping a majority stake in its memory chip business after a planned spinoff.

The willingness to sell more than half of the cash cow, after having initially offered less than 20%, was the biggest surprise in the reform package released that day. The strategic shift aims to lure potential buyers who saw little appeal in the small stake originally on the block. Toshiba's family silver, a business that raked in operating profit of 110 billion yen ($962 million) in fiscal 2015, may come off the consolidated balance sheet.

The nuclear business, the other part of Toshiba's two-legged strategy, also needs to scale back sharply abroad. Toshiba has little choice but to change course and seek new sources of profit. But its dire financial straits leave little wherewithal to pursue acquisitions.

The conglomerate is expected to gradually shift focus to other areas of its portfolio. It will likely concentrate on expanding some of its many small but stable businesses, such as elevators, trains, autoparts and air conditioners. Tsunakawa cited social infrastructure, chips aside from NAND flash memory, and the so-called internet of things in a news conference Tuesday.

But cutting flash memory and nuclear business out of Toshiba's group sales would push down the annual total from 5.6 trillion yen to around 4 trillion yen. Though the company plans to put more weight on profitability than on sales, this figure still amounts to less than half of rival Hitachi's revenue. Toshiba will need to send a clear signal to markets about where it plans to focus next.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 8,426.27M
Shares: 4,237.60M

Hitachi Ltd.

Japan

Market(Ticker): TKS(6501)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 27,172.13M
Shares: 4,833.46M

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