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Electronics Maker Sharp Posts First Annual Loss

February 6, 2009

Due to lower selling prices on flat panel TVs and a firmer yen, Japanese electronics maker Sharp Corp posted a quarterly loss and warned on Friday it would post its first ever annual operating loss.

The company took a quarter cut in its annual dividend outlook and said it planned to cut 1,500 non-regular workers and reduce costs by $2.20 billion.

Sharp is just the latest technology firm to fall victim to a deepening global recession, after Sony Corp, Panasonic Corp and Hitachi Ltd all posted losses.

Currently the world’s No.3 LCD TV maker, Sharp also competes with South Korea’s Samsung Electronics Co Ltd and LG Electronics Inc, which are benefiting from a softer won.

Sharp predicted an operating loss of $326 million for the year to March 31 against its previous forecast of a nearly $500 million profit from 21 analysts polled by Reuters Estimates.

The previous year Sharp reported a $2 billion profit.

One Tokyo-based electronics analyst, who declined to be named, told Reuters the real impact of the weak market and the strong currency was felt only for the last four months.

“So because of that four months Sharp’s guidance has gone from plus 130 to minus 30, a swing of 160,” he said. “These losses are tiny compared to what it could suffer next year.”

Despite tough conditions, the company plans to fortify its sales network and seek alliances with overseas business partners, as well as cutting jobs and reducing costs.

In November, Sharp and Italy’s largest power company Enel planned to spend about $100 billion to set up solar power generating plants in Italy.

Sharp is the second world leader in solar cell makers behind Germany’s Q-Cells.

Valuation losses on its securities holdings also affected sharp’s earnings and a $120 million fine for participating in a price-fixing cartel for LCD panels.

Sharp holds a 14.3 percent stake in struggling home electronics maker Pioneer Corp, whose shares dived 76 percent in October-December.

On Friday, Taiwanese smartphone maker HTC forecast a weak January-March quarter as customers sell down inventory, but remained confident things would pick up by April-June on new products.

HTC predicted its quarterly revenue to be about T$33 billion ($980 million) in the current quarter, slightly higher than T$32.7 billion a year before, and its operating profit margin to fall to about 15 percent from around 20 percent a year earlier, as more players pile into the smartphone sector.

Sharp took a $174 million operating loss in October-December against a $565 million profit a year earlier. Sales fell about 20 percent.

To fortify its LCD TV operations, the company is building a cost-efficient display panel plant in western Japan. It will be the world’s first using so-called 10th-generation glass substrates, which can yield more panels than earlier versions, helping Sharp offer attractively priced LCD TVs.

Sharp Executive Vice President Toshishige Hamano told a news conference in Osaka it would be an overwhelmingly cost-competitive plant.

“It is crucial for us to start up the plant as quickly as possible to improve our cost structure,” he said.

Image Caption: Sharp Corporation displays their newest 65 inch XS1 series LCD monitor during the International Consumer Electronics Show (CES) in Las Vegas on January 8, 2009. The 2009 CES opened to the public on Thursday and continues through the weekend. (UPI Photo/Tom Theobald)

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