Toshiba warns of huge $8.4b loss, and that's actually 'good' news

Troubled conglomerate Toshiba on Monday delayed its earnings for a third time since January, but warned it likely lost ¥950 billion ($8.4 billion) in the just-ended fiscal year, with fears growing about its survival.

The latest delay comes as one of Japan's best-known firms grapples with claims of financial misconduct at money-losing US nuclear unit Westinghouse Electric, which is sitting in bankruptcy protection.

The warning - largely linked to the bloodletting at Westinghouse - was, however, slightly better than an earlier projected net loss of ¥1.01 trillion for the year ended in March.

Toshiba twice postponed nine-month earnings before it released unaudited results last month.

"We can't officially disclose the earnings as they're still being audited," Toshiba president Satoshi Tsunakawa told a news briefing in Tokyo on Monday.

Toshiba - still recovering from a 2015 accounting scandal - has said it needed more time to probe claims of financial misconduct by senior managers at Westinghouse and to gauge the impact on its finances.

The investigation was started after a whistleblower complained that one or more executives at the US unit exerted "inappropriate pressure" on its accounting.

The series of delays have stirred fears that Toshiba could be delisted from the Tokyo Stock Exchange.

The company now faces a deadline for the end of June to file its results with Japan's finance ministry, or face a possible end-of-July delisting.

But it is not clear if the firm's shares will be yanked from the exchange even if that date is missed.

Toshiba stock, which has lost more than 40 per cent of its value since late December, rose 3.43 per cent to ¥261.8 on Monday.

"The market does not feel that the exchange is pushing toward a delisting," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told AFP. "If that was the case, the company would have been delisted a while ago, but the reality is that it's been put off for quite some time."

Monday's announcement comes as a sensitive time as Toshiba looks to sell its prized memory chip business. The plan is facing opposition from Western Digital, which jointly runs Toshiba's key chip plant in Japan. The Japanese firm is the world's number two supplier of memory chips for smartphones and computers, behind South Korea's Samsung.

Numerous reports have suggested that Taiwan's Hon Hai Precision, better known as Foxconn, is offering some ¥3 trillion for the unit. Google and Amazon as well as US private-equity firm Silver Lake Partners and American chipmaker Broadcom are reportedly among the other interested suitors.

Any foreign buyer would need to pass a Japanese government review, given Japan's concerns about losing a sensitive technology and questions about security around systems already using Toshiba's memory chips. They are widely used in data centres as well as smartphones and computers.

The Financial Times reported that Tokyo is ready to guarantee up to ¥900 billion in bank loans if Toshiba chooses a domestic suitor or one with strong Japanese links.

"It would be no surprise if Japanese authorities take action to prevent Toshiba's memory chip technology from being transferred overseas," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. "The technology is quite attractive and lucrative."

Toshiba's huge losses come after its reputation was badly damaged over separate revelations that top company executives had pressured underlings to cover up weak results for years after the 2008 global financial meltdown.

And here's the bad news

Also, Western Digital has sought international arbitration to stop partner Toshiba from selling its chips arm without its consent, potentially derailing a much-needed capital injection for the Japanese conglomerate.

The two companies jointly operate Toshiba's main semiconductor plant but Western Digital is not a favoured bidder for the world's second-biggest NAND chip producer, having put in a much lower offer than other suitors, a source with knowledge of the matter has said. A legal battle could delay or put an end to an auction that could fetch some $18 billion and has attracted suitors such as private equity firm KKR & Co, Taiwan's Foxconn and US chipmaker Broadcom.

Toshiba is depending on the sale to cover billions in dollars in cost overruns at its now-bankrupt Westinghouse unit. After months of souring relations, Western Digital has begun arbitration procedures with the International Chamber of Commerce, demanding Toshiba reverse a move to put their joint venture assets into a newly-formed unit - Toshiba Memory - and stop any sale without Western Digital's consent.

Western Digital's "efforts to achieve a resolution to date have been unsuccessful, and so we believe legal action is now a necessary next step", CEO Steve Milligan said in a statement.

Toshiba CEO Satoshi Tsunakawa told a news conference the complaint was groundless and that Toshiba would push on with the sale, sticking to its plan to complete the second round of bidding on Friday.

"We will make efforts to convince bidders of the legitimacy of the chip-unit sale and wipe away their concerns," he said.

Toshiba argues neither party can block a change of control by the other partner.

Source: Khaleej Times