Toshiba, Desperate for Cash After Accounting

Scandal, Will Sell Microchip Business:

[Business/Financial Desk]
Soble, Jonathan. New York Times, Late Edition (East Coast); New York, N.Y. [New York,
N.Y]28 Jan 2017: B.3.

Resumen
The business makes the information-storing "brains" inside millions of smartphones, digital
cameras and other devices, and it has been the biggest contributor to Toshiba's profits in
recent years. Damian Thong, an analyst at Macquarie Securities, said bringing in a minority
investor was "clearly the default option" for Toshiba, which is eager to stay in the
semiconductor business. Other potential buyers include Western Digital, the American
semiconductor company, which works with Toshiba in some areas; Tokyo...

Texto completo
TOKYO -- Ill-fated investments in nuclear power projects by Toshiba of Japan have already
precipitated an embarrassing accounting scandal at the company. Now the company is selling
its most valuable business to try to undo the damage.

Toshiba, one of Japan's oldest and proudest technology conglomerates, said on Friday it
would spin off its microchip division. The business makes the information-storing "brains"
inside millions of smartphones, digital cameras and other devices, and it has been the biggest
contributor to Toshiba's profits in recent years.

The move is evidence of Toshiba's desperation for cash after the punishing nuclear-related
losses came to light last month.

In another effort to put the costly chapter aside, Nikkei reported Saturday that the company's
chairman, Shigenori Shiga, was ready to resign to take responsibility for the losses. Mr. Shiga,
who has been chairman since June, is in charge of Toshiba's nuclear power division.

In December, Toshiba warned it was preparing to write off "several billion U.S. dollars"
because of ballooning expenses at its American nuclear subsidiary, Westinghouse. That
followed Toshiba's admission in 2015 that it had inflated its earnings by $1.2 billion over seven
years -- a scandal that company investigators attributed in part to nuclear-project managers,
who they said had disguised faltering revenues and cost overruns.

Toshiba is expected to detail the extent of its write-downs next month. Analysts have
suggested they could amount to $4 billion to $7 billion, enough to put Toshiba's future at risk.
Banks have indicated they will keep lending money so the company can pay its bills, but
without that lifeline, Toshiba, a 140-year-old business, could collapse.

Toshiba said it had not yet decided what form the semiconductor spinoff would take, or how
much of the business it would sell to outsiders. But there is not much time to figure it out; the
company said it wanted to complete the process by March 31, the end of its fiscal year.

Analysts estimate the semiconductor business could be worth between 1.5 trillion and 2 trillion
yen, or $13 billion to $17 billion, if Toshiba sold all of it. One option would be to sell shares to
the public, though a private sale to another technology company would be quicker and easier
to arrange, particularly if Toshiba chose to keep part of the company.

Damian Thong, an analyst at Macquarie Securities, said bringing in a minority investor was
"clearly the default option" for Toshiba, which is eager to stay in the semiconductor business.

"Undermining that core business would be anathema in Japan, not just for Toshiba, but for the
government and the whole technology ecosystem," he said. "It needs to sell just enough to
give creditors peace of mind, but not enough that it loses control."

Some see broader national interests at stake.

Getting out of semiconductors entirely would not just deprive Toshiba of a crucial future
revenue stream. If a foreign buyer swooped in, it would also take one of Japan's few remaining
semiconductor producers out of domestic hands. The business's most successful technology,
NAND flash memory, was developed by Toshiba decades ago.

One public declaration of interest in Toshiba has come from Canon, the Japanese camera
company, which uses Toshiba's chips in its products and bought a medical device producer
Toshiba spun off in 2015.

Canon's chairman, Fujio Mitarai, is a former head of Keidanren, the lobbying group
representing Japan's largest corporations, including Toshiba. He said last week that the
semiconductor business was a valuable asset for Japan and "must be protected" and that
Canon "would positively consider" investing.

Other potential buyers include Western Digital, the American semiconductor company, which
works with Toshiba in some areas; Tokyo Electron, a Japanese company that produces
equipment for semiconductor factories; and Foxconn of Taiwan, the contract manufacturer that
recently took over Sharp, another ailing Japanese technology brand.

Terry Gou, Foxconn's billionaire founder, said in an interview with Toyo Keizai, a Japanese
business weekly, that he was interested in purchasing assets sold off by Toshiba, potentially
including the semiconductor operation.

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Copyright New York Times Company Jan 28, 2017