Japan’s Sharp Gets $1.9 Billion Bank Bailout

Analysts argue proposed restructuring doesn't address troubled company's fundamental problem.
Matthew HellerMay 18, 2015
Japan’s Sharp Gets $1.9 Billion Bank Bailout

Sharp Corp.’s $1.9 billion bank bailout has gotten a tepid response as analysts question whether the ailing Japanese electronics maker is going far enough with a proposed restructuring.

For Sharp’s second rescue in three years, main lenders Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ will provide a combined 200 billion yen ($1.7 billion) in a debt-for-equity swap. Japan Industrial Solutions Ltd. is contributing another 25 billion yen ($200 million).

In return, Sharp promised a range of restructuring measures, from 5,000 job cuts (or 10% of its workforce) to accounting maneuvers to the possible sale of its headquarters in Osaka. The company lost 222 billion yen in the business year ended March 31.

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But according to The Wall Street Journal, analysts said such steps would do “little to address Sharp’s fundamental problem — a lack of promising businesses around which to rebuild. Unlike Japanese rivals such as Sony Corp. and Panasonic Corp. , which have sold off money-losing businesses to focus on profitable niches, Sharp has few prospects for generating money to repay the loans.”

“At Panasonic and Sony, the restructuring was about keeping the good stuff,” Amir Anvarzadeh, head of Japan equity sales at brokerage BGC Partners, told the WSJ . “At Sharp, where’s the good stuff?”

Some analysts argue that Sharp ought to sell or spin off the troubled smartphone display business. Prices of LCD panels are falling as competition heats up and low-cost Chinese smartphone makers carve out a growing market share.

But Chief Executive Kozo Takahashi said at a briefing that the company had no intention of reducing its ownership of the smartphone display business below 100%. “The panel business is the core of the new midterm business strategy,” he said.

Analysts say Sharp’s commitment to its proprietary LCD display technology “may actually hamper its ability to sell displays to smartphone makers,” the WSJ noted, “because companies such as Apple prefer to source similar parts from multiple suppliers.”

“All the announced measures are just extensions of what they have been doing and I can’t see a picture at all for how Sharp plans to revive,” said Akie Iriyama, an associate professor at Waseda Business School.