April 19, 2017 3:58 am JST

Spinoffs aim to support Toshiba's post-crisis retooling

Strategic shift underway from memory and nuclear to infrastructure

TOKYO -- As Toshiba seeks to chart a path forward without the two main pillars of its old growth strategy, the company hopes that creating separate companies for such new core businesses as infrastructure will strengthen areas relatively starved for attention until now.

The spinoff targets include social infrastructure, envisioned by the Japanese conglomerate as a central contributor to its fiscal 2019 targets of 4.2 trillion yen ($38.6 billion) in sales and 210 billion yen in operating profit. The segment encompasses a wide range of products, including elevators, air conditioners and railway systems. While this field is unglamorous, it includes technology unique to Toshiba.

Social infrastructure and another business to be split off -- information and communications technology solutions -- are expected to serve as stable, sustainable profit sources, given steady public-sector demand. But their growth potential is limited by dependence on a certain set of customers.

Toshiba had invested relatively little in such fields until massive nuclear-related losses came to light late last year. Now, as the company prepares to sell its memory unit and move American nuclear operations off its books, these secondary businesses have abruptly taken center stage. They will play a leading role in Toshiba's future, President Satoshi Tsunakawa said.

The fiscal 2019 sales target amounts to only about half the peak reached in fiscal 2007. The company must nurture its remaining businesses or risk being unable to continue on in its current form.

After a 2015 accounting scandal, some local governments apparently took such steps as suspending Toshiba from bidding on infrastructure projects. The current crisis has fueled fears about the company's ability to survive. With the spinoffs, Toshiba aims to create separate management structures for key businesses and reduce risks related to important tasks, including renewing a construction business license expiring this year.

Even if the conglomerate does reinvent itself as an infrastructure-centric company, its path to a turnaround will be complicated by others pursuing such a strategy. Hitachi and General Electric are among the global giants taking a similar approach, scaling back in such areas as home appliances in favor of a narrower focus on infrastructure. Competition for orders is intense across the globe.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 9,820.88M
Shares: 4,237.60M

Hitachi Ltd.

Japan

Market(Ticker): TKS(6501)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 29,116.99M
Shares: 4,833.46M

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