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Intervention key to getting Sharp back on top

Publication Date : 04-09-2012

 

Taiwan's Hon Hai Precision Industry Co. chairman Terry Gou yesterday vowed that the company will intervene in the operations of Sharp in the future, which he said is key to revitalising the Japanese tech giant.

Gou said that Hon Hai is not a venture capital firm. If more money is enough for Sharp to turn a profit then the firm could go directly to banks, he added.

According to a Japanese news report, Sharp faces a cash shortage, a large deficit and discordance with Hon Hai.

Gou rejected the claims of discrepant opinions between Hon Hai and Sharp. He said that he and Sharp President Takashi Okuda have met each other and exchanged letters, signifying mutual trust.

He said Hon Hai can help Sharp improve its efficiency and reduce its deficit, resolving the cash shortage.

Intervening in the operations of Sharp will ensure the future success of the company, Gou said. Apple Inc. sends its people to its subcontractors' factories in order to facilitate the stable supply of goods, which is also a form of intervention, he said.

Gou said he hoped Sharp can understand that he does not have time to stay in Japan, and demanded that the power of Sharp's management team be handed over to a younger generation.

Gou said he was informed by Okuda on August 3 that Hon Hai does not need to purchase Sharp' stocks at 550 yen per share. Okuda added that it is not Gou's responsibility to buy these shares, according to the Hon Hai chief.

Hon Hai, the world's largest contract electronics maker, agreed in March to buy a 9.9-per cent stake in the struggling Japanese company for about US$800 million, or 550 Japanese yen (US$7.01) per share.

Gou reiterated that there had never been a plan for a press conference for Hon Hai and Sharp to sign any contract at the 10th-generation panel factory in Osaka, adding that former Vice President Vincent Siew should have been the focus of the day instead of him.

Hon Hai's market capitalisation surged yesterday by over NT$50 billion as the company reported better-than-expected second quarter results.

Okuda will visit Taiwan this week in hopes of finalising the company's planned alliance with Hon Hai, the Japanese daily Sankei Shimbun reported yesterday.

The two companies are holding talks to set a date for Okuda's meeting with Hon Hai's chairman in Taipei to flesh out the terms of their planned partnership, the business daily said.

Sharp's stock has plunged steeply since then, falling to 186 Japanese yen per share Monday, prompting Hon Hai to ask to renegotiate the terms of the deal.

Gou was in Japan last week to clinch the alliance, but he abruptly canceled his scheduled meeting with Okuda August 30 and instead returned to Taipei that day, according to the Sankei Shimbun, sparking speculation that the deal was in tatters.

The breakdown in talks turned on the competing visions that the two companies have for a potential alliance, which Gou told reporters when he arrived in Japan last week was far more important than the final price Hon Hai would pay for a stake in the company.

Okuda was quoted in a Sunday report by Japanese daily Nihon Keizai Shimbun that Gou seems to be more keen to participate in Sharp's business than to deal with issues regarding the acquisition price and stake ratio.

According to Okuda, Gou is hoping to forge a strategic alliance with Sharp, but the Japanese company only wants to form a capital alliance with Hon Hai, also known as the Foxconn Technology Group.

In terms of the deal itself, the Sankei Shimbum said Sharp intends to bridge the price gap resulting from drops in its stock prices by selling its TV plants in Mexico and China to Hon Hai.

Hon Hai, however, wants to expand its cooperation with the Japanese company, including having Sharp supply patented technologies, the paper said.

Because uncertainties over the deal could complicate Sharp's efforts to obtain additional credit from main creditor banks to help finance restructuring costs for its LCD and TV operations, Sharp wants to conclude the new round of negotiations with Hon Hai as soon as possible, the Sankei Shimbun said.

It remains unclear, however, how willing it is to hand over some degree of operational control to Hon Hai and its chairman.

Pressured by the yen's strength and intense competition from South Korean and Chinese rivals, Sharp's mainstay businesses — LCD TVs and solar panels — are all unprofitable.

It still enjoys at least two niches in the flat panel industry, however — AMOLED technology and the 10th-generation flat panel manufacturing expertise, according to industry analysts.

 

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