Japan's Sharp running out of options: analysts
Japan's Sharp Corp is fast running out of options to repair its disintegrating balance sheet, analysts say, raising fears about its viability as investors bolt for the exit.
The century-old consumer electronics giant suffered a bloodletting this month with its Tokyo-traded shares diving to near 40-year lows after it reported huge quarterly losses and warned of more red ink to come.
On August 3 the shares plunged by about one-third to levels last seen in the early 1970s, shaving more than $1.0 billion off the embattled firm's value.
They staged a recovery towards the end of last week, closing Friday at 209 yen, up from 181 yen earlier in the month.
Standard & Poor's quickly cut Sharp's credit rating after the results -- making it tougher to raise fresh funds -- and the producer of Aquos televisions faces a worrying cash crunch as it scrambles to re-tool its business.
The corporate overhaul includes cutting thousands of jobs from Sharp's global workforce, the first layoffs since 1950, in a bid to chop about $1.3 billion in fixed costs from its dented balance sheet.
"Sharp needs to stop haemorrhaging... Its bad performance casts doubt on cash flow, the lifeblood of a company," said Toshiyuki Kanayama, senior market analyst at Monex Securities.
Investor fears spiked when Sharp said it lost 138.4 billion yen ($1.77 billion) in the April to June quarter, nearly three times more than in the same period last year, citing falling demand for liquid crystal display televisions.
The Osaka-based firm, which began life making belt buckles and invented the mechanical pencil, warned it expected to book a net loss of 250 billion yen in the fiscal year through March 2013 -- far bigger than an earlier projection for a 30 billion yen shortfall.
The share price plunge also casts doubt on the future of a deal that would see Taiwan's Hon Hai Precision -- best known as a manufacturer of Apple gadgets such as the iPhone and iPad -- inject about $800 million into struggling Sharp and invest in one of its LCD factories.