TOKYO -- A merger of Toshiba's personal computer operations with those of two industry peers would mark significant progress in the company's restructuring efforts necessitated by a massive accounting scandal.
Toshiba, Vaio and Fujitsu are considering consolidating PC operations. Toshiba looks to keep its stake in the combined company fairly low, thus removing the PC business from consolidated accounting.
Inflated profits, unreported losses and other irregularities let Toshiba's unprofitable businesses go unnoticed for years. New management, installed in September, announced a slate of restructuring measures, including the sale of image sensor production facilities to competitor Sony and the delegation of Chinese appliance sales to partners in that country.
Toshiba had already announced restructuring plans for its PC operations in September 2014. The company has since pared its 32 sales affiliates worldwide down to 13 and exited the consumer computer business in emerging nations. More than 20% of non-production staff, or around 900 employees, have been removed from the payroll. But the business has stayed stubbornly in the red, with sales slipping around 10% to 666.3 billion yen ($5.36 billion) for the year ended March.
Toshiba's PC business was once the industry leader. Its release of the first-ever notebook computer in 1985 took the world by storm, enabling it to corner the market. The upstart division was nevertheless long considered secondary, as infrastructure operations remained the core of Toshiba's business. But that began to change in 2005, when Atsutoshi Nishida, a veteran of the PC division, became president.
The PC division also then became a breeding ground for accounting fraud, improperly booking profits on parts transactions with suppliers. Profit from the business was padded to a tune of 57.8 billion yen from fiscal 2008 through April-December 2014.
President Masashi Muromachi, responsible for rehabilitating the scandal-stricken company, has made restructuring the PC division a priority, alongside a portion of the semiconductor business, television operations and the major appliance division. The computer business's scandalous past makes reform all the more important.
Toshiba will need to set a path for a turnaround for its PC operations in order to start integration talks with Fujitsu and Vaio. A development center in Ome, Tokyo, production plants in China and other facilities remain to be dealt with, as do a number of overseas sales units. Consolidating facilities and otherwise trimming fat will be essential to opening a way forward for the business.