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Toshiba s quarterly operating profit fell almost 9 0 per cent, as turmoil at the scandal - ridden Japanese industrial conglomerate deepened with the resignation
Toshibas quarterly operating profit fell almost per cent, as turmoil at the
scandalridden Japanese industrial conglomerate deepened with the resignation of a
top executive over improper entertainment expenses. The disappointing results far
below analysts forecasts come as Toshiba considers a $bn buyout proposal from
a consortium led by a Japanese private equity firm, in what would be the countrys
largest takeprivate deal.
Toshibas chief operating officer Goro Yanase resigned after auditors found he
had repeatedly submitted entertainment expenses without reporting the names of
attendees, in violation of company rules. The alleged misconduct took place when he
was a board member of a subsidiary in before his nomination as chief operating
officer. The company posted an operating profit of bn $mn for the October
December quarter, far less than a consensus estimate of bn according to S&P
Global Market Intelligence.
Its harddrive business was hit by a drastic weakening of demand as
manufacturers and businesses curbed spending in the face of a recession. The
conglomerate also recorded a bn impairment charge for its Toshiba TEC printing
business as the subsidiarys share price fell. Toshiba cut its fullyear operating profit
forecast by a quarter and now expects to post one of bn for the fiscal year through
to March. It is the second downward revision of its guidance since November.
The company blamed oneoff factors for its poor performance, but the abrupt
resignation of the chief operating officer is another blow to its reputation. It has lurched
from accounting fraud to financial crisis and a protracted battle with activist investors.
The yearold enterprise last week received a final acquisition proposal from
Japan Industrial Partners, which has teamed up with financial services group Orix,
Chubu Electric, chipmaker Rohm and other Japanese companies. If the proposal is
approved by Toshibas board and activist shareholders, it would conclude an eight
year saga that has brought the industrial conglomerate to the brink of collapse.
With the aim of acting in the best interests of shareholders and other
stakeholders the company will conduct necessary negotiations, said Toshiba chair
Akihiro Watanabe in a statement on Tuesday. We feel strongly that there is an urgent
need to transform the company, he added. We believe it is important to reach a final
conclusion on the strategic alternatives of the company as soon as possible and to
start working towards a new stage.
I dont think there are no business opportunities for Toshiba, but the latest
earnings results and the chief operating officers departure shows it is in a difficult
situation, said Masahiko Ishino, a senior analyst at advisory company Tokai Tokyo
Research Institute. It could be questionable that banks are financing the massive
buyout. What recommendation would you make to Toshiba management in addressing ONE
of the strategic issues that the company faces from the situation depicted above?
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