Sanyo Electric to sell cellphone business
Sanyo Electric Co., which is headed for its third straight loss this business year, plans to sell its cellphone operations as part of a new restructuring plan, the Nihon Keizai newspaper reported on Thursday.
The business daily said Sanyo, which earlier this year issued $2.6 billion worth of preferred shares on very favourable terms to Goldman Sachs and two other financial institutions to ensure its survival, will also sell its semiconductor division.
The newspaper said Sanyo would look to spin off its cellphone division as early as in the next financial year starting in April and then sell the majority of the new company to a competitor.
Sadakazu Shima, a spokesman for the Osaka-based electronics maker, declined to comment on the report.
Sanyo embarked on large-scale restructuring last year, aiming to cut 15 percent of its workforce, close factories, and trim unprofitable operations, but it has not achieved the desired result.
A company source told Reuters last week that Sanyo would likely post a net loss as large as 50 billion yen ($428 million) for the business year to March 2007, missing its initial forecast for a profit of 20 billion yen.
Sanyo has been hit by weak demand for its mobile phones in North America, sliding sales of digital cameras, and larger-than-expected costs for job cuts and consolidation of production facilities, the source said.
The company is expected to announce the downward revision when it unveils first half results on Friday.
Sanyo will also look to sell its chip operations, which it spun off in July. Other steps include ending domestic sales of air conditioners, cutting advertising and promotion expenses, and shifting digital camera production in Japan and South Korea to other parts of Asia, the Nihon Keizai said.
Sanyo has already had a series of setbacks this year.
In June, Finland’s Nokia scrapped a plan to jointly make mobile phones with Sanyo. And in August, Sanyo disappointed investors again by announcing that an alliance with Quanta Computer Inc. <2382.TW> in the TV business would be much narrower than initially hoped.
Media reports of the deep loss this year sent Sanyo’s shares to a 31-year low on Monday. On Tuesday, Standard & Poor’s warned that it might cut Sanyo’s corporate credit rating, citing concerns it might not be able to stabilise earnings over the medium to long term.
Goldman, Daiwa Securities SMBC, and Sumitomo Mitsui Banking Corp., the three financial institutions that bought a combined 300 billion yen in preferred stock from Sanyo, have all agreed in principle to the new restructuring steps, the Nihon Keizai said.
The stock purchase made Daiwa Securities SMBC, the investment banking arm of Daiwa Securities Group Inc. <8601.T>, and Goldman Sanyo’s two top shareholders. Sumitomo Mitsui, a unit of Sumitomo Mitsui Financial Group (SMFG) <8316.T>, is Sanyo’s main bank.
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