The following appears on online.wsj.com
TOKYO—After posting the worst annual loss in its 100-year history, Sharp Corp.6753.TO +4.94% said
it plans to replace both its president and chairman after just one year
in an unusually public rebuke of management that underscores the depth
of the struggling electronics maker’s problems.
Sharp said Tuesday that Executive Vice President Kozo Takahashi, 58,
will replace current President Takashi Okuda, who led the company during
a tumultuous year in which it scrambled to secure capital and warned
about its future as a going concern.
Mr. Okuda will become a chairman without representative rights,
replacing Mikio Katayama, a former president who oversaw Sharp’s
aggressive—but ultimately failed—expansion of its liquid-crystal-display
TV-panel business.
The changes will occur after Sharp’s shareholders meeting June 25.
Sharp’s woes are a microcosm of the problems that have gripped Japan’s once-dominant electronics industry.
After years of record profit that catapulted it to the top of Japan’s
electronics sector, Sharp spent billions of dollars to build a
state-of-the-art LCD plant in Japan. When demand for flat-screen
televisions slowed in the wake of the financial crisis and the yen rose
sharply—hurting the competitiveness of its exports—Sharp’s losses
ballooned.
Like its Japanese peers, Sharp also failed to match the operational speed or marketing might of Samsung Electronics Co. 005930.SE +1.56% Sharp’s
televisions dominated in the domestic market, but it struggled to build
the same type of brand appeal overseas. When the Japanese government
eliminated subsidies encouraging domestic consumers to switch to new LCD
models, it worsened Sharp’s problems.
Sharp logged a bigger net loss of ¥545.35 billion ($5.4 billion) in
the year ended in March, from a ¥376.08 billion loss in the previous
year. Sharp’s operating loss came to ¥146.27 billion from a loss of
¥37.55 billion a year ago on ¥2.48 trillion in revenue, virtually
unchanged from last year.
“We need to say goodbye to the Sharp that we knew in recent years,”
Mr. Takahashi told reporters at a news conference. “We need to be ready
to change everything at the company, other than the founding
principles.”
Sharp, a supplier of components to Samsung and Apple Inc., AAPL -2.62% is
counting on a recovery in demand for its displays to help its LCD
operations turn profitable this year. It said it is seeking supply
agreements with more companies and will try to stay ahead of competitors
in display technologies.
For the fiscal year ending in March 2014, Sharp said it plans to
return to the black with a net profit of ¥5 billion and an operating
profit of ¥80 billion on revenue of ¥2.7 trillion.
Sharp’s capacity to spearhead innovation will be limited by its
weakened financial situation. As of the end of March, it had nearly ¥2
trillion in liabilities, 10 times the amount of cash and cash
equivalents on hand. The company’s equity ratio, a measure of financial
stability, is 6%. A ratio below 10% is considered dire.
Crippled by two straight years of record losses, Sharp has been forced to turn to rivals Hon Hai Precision Industry Co. 2317.TW -0.50% Ltd. and Samsung as well as chip maker Qualcomm Inc. QCOM +0.27% for equity investments.
It is talks with its bankers to extend loan payment deadlines and has
exercised an additional credit facility of up to ¥150 billion from its
main lenders, Mizuho Financial Group Inc. 8411.TO -1.32% and
Bank of Tokyo Mitsubishi UFJ. This additional borrowing is on top of a
¥360 billion credit line extended by the banks and others.
Two people from the banks will join Sharp’s management, to help
further restructuring. Sharp is facing a ¥200 billion convertible bond
redemption in September and an additional ¥130 billion in bond
redemptions in 2014
