AT the end of last year, Toshiba’s shares reportedly fell 20 percent due to its nuclear buyout misstep that has cost it dearly ever since. At that time, the Japanese company was set to lose billions, which has transpired in its latest earnings report.
As reported by Bloomberg, Toshiba has just announced its expectations to lose a whopping US$6.3 billion over its nuclear power business – thanks to “cost overruns at a US unit and diminishing prospects for atomic-energy operations.” To address the massive writedown, chairman Shigenori Shiga will be stepping down.
Some are allegedly questioning whether Toshiba has “control over its finances” as the company had missed its own earning announcement deadline. Meanwhile, its shares were valued at the lowest in 38 weeks.
— Financial Times (@FT) February 14, 2017
Toshiba is now under immense pressure to develop alternative income streams, one of which was putting its semiconductor business assets up for sale. It was reportedly in talks with Western Digital, which would price a 20 percent stake at US$2.7 billion. Limiting the sale to 20 percent was a way for Toshiba to maintain control of its memory chip business, but now that the balance sheet writedown has gone public, Bloomberg points out that the company may be forced to sell a majority stake.
Toshiba’s memory chip business is considered to be one of the few profitable ventures within the company’s portfolio, as it made 50.1 billion yen (approximately US$438 million) in the fiscal first half of 2016.
Masahiko Ishino, an analyst with Tokai Tokyo Securities, weighed in on Toshiba’s woes: “The questions surrounding Toshiba are so numerous, where do you even begin? Investors want to know what will happen to the nuclear and chip business, whether elevator operations and some of Toshiba’s listed subsidiaries will be sold off. There is also the question of why the nuclear writedown happened in the first place.”
The trouble started back in 2006 when Toshiba hedged its bets on nuclear by acquiring Westinghouse for $5.4 billion. Dreams of being able to cash in on the rosy future of nuclear power were dashed in 2011 after the Fukushima disaster, and Toshiba has had trouble coming back from it ever since.