Toshiba disposes of a struggling business segment allowing Sharp to reenter the PC business.
Earlier this month Toshiba Corp. announced that it had transferred 80.1% of the outstanding share of its PC business, Toshiba Client Solutions (TCS), to Sharp for approximately ¥4 billion ($36 million). Sharp will then issue $1.8 billion in new shares to reacquire preferred stock from banks, signaling in what some financial analysts are describing as a “swift recovery under the control of Foxconn.”
TCS produces the Dynabook line and sales of the Dynabook brand are expected to continue under Sharp. This isn’t Sharp’s first entry into the PC space. The company originally began selling personal computers in Europe and Japan in the late 1970’s, and would later introduce its own notebook computer in Japan before exiting the business in 2010 because of competition that was severely impacting the profitability of its PC business.
This acquisition represents another example of Sharp’s parent company’s Foxconn’s deep pockets. The acquisition of Sharp two years ago has already paid off for Foxconn as Sharp recently posted its first annual net profit in four years, much of that resulting from cost cuts and Foxconn’s sales network in China. It is expected that Foxconn’s sizable procurement network for parts will be an asset as Sharp reenters the PC business with financial analysts predicting Sharp will be able to make a fast profit by improving production efficiency.
During a meeting last week with new Sharp Imaging and Information Company of America President & CEO Mike Marusic, we asked him about the acquisition. He informed us that he didn’t have a lot of new information to share with us at this point, but did emphasize that the addition of the Toshiba laptop line will bring Sharp new opportunities, especially since Foxconn has a relationship with Microsoft.
For the financial community that follows Toshiba, the sale of its PC business was not a surprise as it was having difficulty competing against Chinese and Taiwan PC makers. Toshiba, which introduced the world’s first laptop computer in 1985, sold 17.7 million PCs at its peak seven years ago. In 2017 that figure had declined to 1.4 million units, according to a Reuters news story. Toshiba will now focus on growing its energy business and other business segments, including office and retail businesses in the wake of the sale.
The sale is not expected to have a negative impact on Toshiba America Business Solutions (TABS). In a letter to dealers, TABS President Scott Maccabe wrote, “As the personal computing business has been dramatically reshaped over the last decade, Toshiba has concluded that the best way to strengthen TCS, increase its corporate value, strengthen its competitive position in the global market and continue to develop the business, is to partner with Sharp.
“Toshiba Corporation has stated that it will focus on four business domains: Social Infrastructure, Energy, Electronic Devices and Digital Solutions. Our parent company, Toshiba Tec and specifically the retail and printing business segments, are highlighted by Toshiba as core to the company’s digital transformation acceleration strategy aimed at both strengthening current earnings and providing an engine for growth.
“Over the last 12 months, Toshiba Corporation has restructured its business with a goal of strengthening its capital base and governance as well as articulating its go forward strategies.
“We are pleased to see that Toshiba Tec’s retail and printing business continue to be key areas for growth for Toshiba Corporation and more importantly that Tec remains strong financially and committed to investing in our growth and the development of new and exciting solutions. The sale of the PC business by Toshiba Corporation has no impact on Toshiba America Business Solutions. As always, we are firmly committed to remaining a leading provider of multifunction printers, managed document solutions and digital signage and continuing our award-winning levels of customer service.”
It seems like we’ve been here before as Toshiba Corp. has sold off various segments of its business that have been in decline to focus on its core strengths. We’re not sure if anyone saw this coming a year ago after Toshiba had sold its medical unit to Canon at the end of 2016 or even last fall when it agreed to sell its memory chip business to the U.S. private equity firm Bain Capital—a deal that at press time has yet to close. We’d like to think that this is the end of the story, but you know how that goes. However, based on Maccabe’s letter to dealers and our recent visit to Japan where we met with Toshiba Tec senior executives, we see the same strong commitment to the retail and printing business by Toshiba Tec that Maccabe outlined in his letter, and don’t believe that TABS’s dealers will not be impacted negatively by the sale of a segment of the business that had little or no impact on them in the first place. On the other hand, as Sharp rounds out and expands its Smart Office offerings, the addition of a laptop line seems like an excellent fit right now.
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