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Is Toshiba's glass half-empty or half-full?

Embattled Japanese conglomerate breaks 28-year profit record

Toshiba Chief Financial Officer Masayoshi Hirata speaks at an earnings event in Tokyo on Thursday.

TOKYO -- Toshiba posted a record operating profit for the six months ended Sept. 30, but to some this only highlighted the company's precarious position -- 90% of the profit came from memory chip operations it is working frantically to unload by the end of the current fiscal year.

On Thursday, the company reported 231 billion yen ($2.03 billion) in group operating profit for the April-September half, up about 150% from a year earlier and displacing a 1989 record propped up by vigor in such areas as personal computers. Smartphone memory and other such products were drivers this year.

Memory unit's last hurrah?

Operating profit from the memory business quadrupled to 205 billion yen -- roughly nine-tenths of the group's total. Without the memory business, Toshiba's six-month operating profit would be just 26.8 billion yen. And its sales of 2.38 trillion yen, a 5% gain, would instead amount to 1.8 trillion yen or so.

Other aspects of the company's Thursday earnings report also raised questions as to how Toshiba will fare without its poster child. In April-September, operating income grew from such retail solutions as point-of-sale technology but fell in three core areas: infrastructure, energy, and industrial information and communications technology.

Toshiba maintained its full-year forecast of sales growing 2% to 4.97 trillion yen and operating profit jumping 59% to 430 billion yen. But without the memory unit, sales will likely fall to 4 trillion yen and operating profit to tens of billions of yen in the year through March 2019.

Survival plans

To bolster profitability, the company will step up restructuring. Costs for the efforts are seen at 60 billion yen for the year ending March 2018 -- up from previous plans of 42 billion yen. The company is pulling out all the stops, weighing "withdrawing from unprofitable businesses and re-evaluating locations," Chief Financial Officer Masayoshi Hirata said Thursday.

Operations potentially on the chopping block include PCs and visual products, centering on televisions, whose respective segments bled 3.7 billion yen and 4.7 billion yen in red ink on an operating basis for the April-September half. Toshiba aims to "thoroughly restructure all businesses suffering losses, without exception," to improve profitability, Hirata said.

Not out of the woods yet

Years of woes, including massive losses in American nuclear energy operations, forced Toshiba to put the memory arm up for sale to lift net worth out of the red. It struck a deal in September with an international consortium of buyers led by Bain Capital of the U.S. after months of drama.

Toshiba would pocket 1.08 trillion yen from a successful sale. This would enable the company to report a net worth of 330 billion yen at the close of the current year through March 2018. But if the deal is pushed back beyond then over antitrust reviews in relevant countries, for example, the company would end the year with a 750 billion yen negative net worth.

Because Toshiba would be kicked off the Tokyo Stock Exchange if it finishes a second consecutive year with debts exceeding liabilities, the company is "considering various financial strategies" in case the deal does not go through in time, Hirata said.

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