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Toshiba Mulls Sale Of Chip-Unit Stake

11/28/2015 | 02:48am US/Eastern
   By Takashi Mochizuki and Erikc Pfanner 

TOKYO -- Toshiba Corp. on Friday said it is considering selling a minority stake in its semiconductor business to raise funds in the wake of a drawn-out accounting scandal.

The business, which sells memory chips to Apple Inc. and other smartphone makers, has been Toshiba's main moneymaker in recent years as the fortunes of its personal-computer, consumer-electronics and nuclear operations have worsened.

Chief Executive Masashi Muromachi said at a news conference that Toshiba would consider a stock-market listing or a transaction with another company but would keep control of the operation. "It is a core business for us, so we won't completely detach the business from the group," he said, adding no sale is imminent.

The semiconductor business requires continuous investment to maintain its competitiveness against rivals such as Samsung Electronics Co. Meanwhile, Toshiba's ability to raise funds has been squeezed by an accounting scandal.

After acknowledging that it had overstated profits by 155 billion yen ($1.3 billion) over seven years, Toshiba shook up its management and board this summer. However, disclosures have continued to trickle out.

Toshiba earlier this month said its U.S. nuclear unit, Westinghouse Electric Co., booked $1.3 billion in previously undisclosed impairment charges for its 2012 and 2013 fiscal years. Though many analysts see Toshiba following suit with a similar write-down, company executives on Friday reiterated that they saw no need to do so.

In the most detailed explanation of Westinghouse's financial situation since Toshiba's accounting problems surfaced earlier this year, the parent company said the U.S. unit has incurred a cumulative operating loss of $290 million since Toshiba bought it 2006. Previously, Toshiba had said Westinghouse was profitable, without specifying a time frame.

Toshiba said its nuclear-fuel and plant-maintenance business remains profitable and stands to grow as the number of active nuclear-power plants increases globally. Demand for new plants collapsed after the Fukushima disaster in Japan in 2011, but Toshiba officials said it should rebound as global demand for cleaner energy rises.

"There is no way the U.S. can meet its clean-energy projections and not increase its nuclear power generating capacity," Westinghouse Chief Executive Danny Roderick said in an interview.

Toshiba said it also aims to take on reactor-decommissioning projects, which should bring additional revenue.

The company expects to book an operating profit of 30 billion yen from its nuclear business in the March-ending fiscal year and projects an average operating profit of 150 billion yen a year from fiscal 2018 through 2029. But some analysts aren't convinced.

"The presented business outlook is unrealistic in many aspects," said Hideki Yasuda, an equity analyst at Ace Research Institute. "For one, Westinghouse would need to hire a whole lot of workers to achieve the plan."

Mass hires might be a challenge when Toshiba is focusing on cost cuts. The Tokyo Stock Exchange has placed the company on a watch list, making it difficult for the company to issue new shares or debt.

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