Japan’s securities watchdog is likely to recommend a $60 million fine for scandal-hit Toshiba for its advanced books cookery over the past seven years
According to the Nikkei business daily, the Securities and Exchange Surveillance Commission will make the recommendation to the Financial Services Agency as early as this month.
Toshiba has expected the fine and apparently been putting its pennies aside in a big jar by the door. The fine will not harm its profits, although given the fact it is short of cash it would probably like to spend the money on something else.
Tosh inflated profits over roughly seven years, in what third-party investigators blamed on over-reaching and a culture that discouraged employees from questioning authority. The fine will be eight times the largest that watchdogs have issued in Japan.
The record was 1.6 billion yen paid by industrial conglomerate IHI Corp in 2008 for accounting-related violations, the Nikkei said.
Toshiba has since appointed more outsiders to its board of directors, which this month said it had sued five former executives over mismanagement.
Personal and entry level storage shipments fell 13.4 percent in the third quarter, according to a survey by IDC.
And shipment values fell by 19.8 percent in the quarter, compared to the same quarter in 2014, amounting to $1.3 billion.
IDC differentiates between personal storage and entry level storage, and said personal storage accounts for over 98 ercent of the market.
Most shipments had 1TB and 2TB capacity, accounting for 75 percent of the personal storage market.
USB is still the most popular choice in the market while ethernet products showed a large decline in the last four quarters.
Top dog in the market is Western Digital with 31.2 percent of the market, followed by Seagate (25.9 percent) and Toshiba (18.2) percent.
Toshiba has decided to sell its image sensor business to Sony as part of a cunning plan to restructure in the wake of its $1.3 billion accounting scandal.
The image sensor manufacturing plant in Oita, southern Japan will go to Sony by the end of the fiscal year through March. Tosh is giving up on the sensor business completely.
Sony will take on the sensor business’ 1,100 workers. The deal was worth around $166.15 million.
Toshiba also said it will withdraw from the white light-emitting diode (LED) business, part of its semiconductor division.
The moves amount to the first restructuring steps Toshiba has announced since it said earlier this year that it had overstated earnings in a wide range of businesses including chips, television sets and personal computers over seven years.
Sony gets to solidify its already dominant position in the industry. It already controls about 40 percent of the market for complementary metal-oxide semiconductor (CMOS) image sensors.
The semiconductor industry’s rapid consolidation proceeded apace as Western Digital agreed to buy SanDisk today for $19 Billion. SanDisk had been shopping itself to potential buyers which also include Micron Technology Inc. The offer values SanDisk [SNDK} at $86.50 a share, a 15% premium on Tuesday’s market close. SanDisk shares rose 5.7% to $79.50 prior to market open – the same shares were trading under $60 a share before rumors spread concerning the firms potential sale.
Western Digital shares dropped 2.5% to $73 in premarket trading having lost nearly a third of their value so far this year. Ironically, both companies reported better-than-expected results for their latest quarters this morning.
The acquisition comes just three weeks after China’s Tsinghua Unigroup Ltd. agreed to pay $3.78 billion for a 15% stake in Western Digital, the latest U.S. tech company scrambling for politically connected (capital source) Chinese partners.
Under the deal Western Digital said it would pay $85.10 a share in cash and 0.0176 shares in stock for each share of SanDisk if the Tsinghua investment closes first. If that deal hasn’t closed or has been canceled, it will pay $67.50 in cash and 0.2387 shares.
SanDisk has missed their earnings estimates for the last three quarters and according to downgrades by market analysts appears to be suffering from poor execution on a number of fronts:
- Loss of Apple’s SSD business
- A too optimistic Enterprise strategy – missing 2TB SATA drive solution
- Poor integration of the Fusion I/O acquisition
- 3D NAND migration uncertainty – late entry position
- High margin retail business is slowing
- SanDisk must renegotiate licensing revenue with Samsung (Aug-16, now 40% EPS)
- Poor inventory management
- SanDisk granted 5 U.S. patents last year
Steve Milligan Western Digital CEO will become chief executive of the combined company, located at Western Digital’s base in Irvine, Calif. SanDisk’s CEO Sanjay Mehrotra is expected to join the Western Digital board after the deal closes.
Western Digital expects the deal to add to earnings within 12 months of closing, and will achieve annual synergies of $500 million within 18 months.
These are tough times in the memory sector. Company’s like SanDisk have been facing increasing price pressures over the last six months that have limited their ability to establish a better than break-even proposition going forward. SanDisk expanded into areas that it was ill equipped to manage ending in their distressed selloff to WD.
Western Digital has been in the process of designing a proprietary non-volatile memory and recently picked up technical people from the failed Contour Semiconductor. SanDisk has lost new product design momentum relying on (from what we can tell) their partner Toshiba to perform the heavy lifting.
Toshiba is having their own set of issues with accounting problems; resignation of the CEO and several board members; and are building a new fab making one wonder why in the world would anyone invest in this mess? Evidently WD has seen a way through. Toshiba seems to be absent from this conversation…., ?
A report said that state owned Tsinghua Unigroup, which alread owns a 15 percent stake in Western Digital, has its eyes set on other acquisitions too.
Tsinghua has already attempted to take over US DRAM manufacturer Micron, but a takeover is probably out of the question. However, according to a report in Digitimes, it will try and take a 10 to 20 percent stake in Micron instead.
Sandisk and Toshiba, which both make NAND flash technology, are both being eyed up by Tsinghua, according to the sources.
One problem with taking a stake in Micron is that its technology apparently uses patents licensed from third parties. But that wouldn’t happen if it managed to take over Toshiba’s flash technology and Sandisk’s.
The Chinese government has a five year plan to create its own semiconductor industry for storage, including hard drives, DRAM and NAND flash memory.
Sandisk, Toshiba and Micron haven’t commented on the report, which you can read here.
The newly fledged CEO of Toshiba said that the accounting irregularities means that the firm will have to look towards laying off staff in divisions that are underperforming.
Masashi Muromachi has introduced a management team to take a cool long hard at its different business divisions and that could well mean layoffs.
According to Reuters, those divisons include its PC, home appliance and TV businesses.
Its nuclear business, which has also been under scrutiny, will also need to be looked at following the Fukushima disaster in Japan, which has virtually put an end to the business there.
Because of the irregularities, Toshiba may also need to take out bank loans because it is unable to raise money by issuing equities and bonds.
Muromachi did not say what the extent of the layoffs might be.
Toshiba is finding it tricky to move beyond its $1.3 billion accounting scandal.
The company has booked a $318 million net loss for the past financial year and pledged a bold restructuring.
The submission of its books, twice postponed due to its accounting woes, helped to allay concerns that the company was about to be delisted.
Shares in Toshiba rose 1.8 percent on Monday, but they are still down around 30 percent since its accounting problems were disclosed in early April.
Analysts warned that the company still had to tackle deep-rooted problems particularly what it was going to do with its unprofitable PC and TV businesses.
The accounting woes are also not going away because the company is facing shedloads of shareholder lawsuits.
The weaker assessment included a more conservative estimate on the value of its investment in South Texas Project, a US power plant project. The company, however, denied speculation that it would need to draw down deferred tax assets on Westinghouse, its US based nuclear business.
The company’s new Chief Executive, Masashi Muromachi, promised to announce a restructuring plan for its semiconductor, PC and TV businesses by the year end. He also said it was reconsidering plans by his predecessor, who stepped down amid the scandal in July, to grow the healthcare unit through acquisitions.
The company also announced on Monday that former Shiseido president Shinzo Maeda would be the head of a revamped 11 member board, the majority of which are external directors, pending approval at an extraordinary shareholders’ meeting at the end of the month.
Toshiba was supposed to announce its annual financial results today but that was not to be because it has discovered extra accounting errors to compound the “errors” that caused a change of management to the top.
Toshiba delayed its financial results in March after accounting discrepancies forced the management to be replaced by a fresh team of unsullied people were voted on to its board.
According to Reuters, the latest discrepancies relate to problems at a US subsidiary and some errors on charges on fixed assets at several other subsidiaries.
CEO Masashi Muromachi said he couldn’t apologise enough for the trouble caused by the Toshiba errors but would now announce its financial results on September 7.
Muromachi said Toshiba had discovered 10 new instances of accounting mistakes and said that if he couldn’t meet the new deadline he might resign.
But that would likely lead to more turmoil at Toshiba because he was appointed first as interim CEO and then as permanent CEO.
Korean memory giant SK Hynix said it intends to build two fabrication plants in South Korea and will spend close to $26 billion on their construction.
SK Hynix is the second biggest manufacturer of dynamic random access memory (DRAM) in the world, ranking second behind the other big Korean memory manufacturer, Hynix. US DRAM company Micron and Japanese giant Toshiba are also in the memory game.
According to a report at Reuters, SK Hynix will complete the fabs by 2024. This type of spending on state of the art semiconductor fab plants is not unusual. Companies making these large capital investments cost them out over a period of years.
SK Hynix is essentially playing catch up with Samsung, which is likely to hold the lead until at least the beginning of next year.
The $1.2 billion accounting scandal that exposed cracks in the management of Toshiba has lead to the company suggesting outsiders should join its board of directors.
Investigators said staff at Toshiba misreported financial results because there was a corporate culture that meant employees just did as they were told, without question.
But interim president Masashi Muromachi is likely to stay on in role as the number of external directors will number seven on the board of 11.
Proposed members include Mitsubishi Chemical chairman Yoshimitsu Kobayashi, Asahi Breweries’ Koichi Ikeda, and Shisheido’s former president Shinzo Maeda.
The new appointments will be presented to shareholders next month for approval.
The company is expected to report a loss for the financial year that ended in March 2015, with write offs worth over $1 billion in different sectors of its business including semiconductors and appliances.