Toshiba denies NAND exit report with 'no decision made' comment

Forecasts huge loss, accounting scandal still looms

Giant Japanese conglomerate Toshiba, currently restructuring in the wake of a huge accounting scandal, has denied media reports that it intends to pursue a flash foundry spin-off.

The Japan Times has reported (citing sources) that the flash foundry business could be set up as a separate subsidiary owning the Yokkaichi plant in Japan’s Mie Prefecture.

This fab is a joint Toshiba-SanDisk operation, and such a subsidiary could raise its own business development funds.

However, Toshiba issued a statement on Friday about its NAND business, which is worth a read:

Several media reports today have stated that Toshiba Corporation intends to spin off its NAND flash memory business, as a listed company. The company has not made any such announcement.

The company is promoting measure to strengthen the competitiveness of the NAND flash memory business, including new product development and productivity enhancements, but these do not include the reported decision to spin off the business or to list on the stock exchange, and no decision has been made in this regard.

Toshiba has been crippled by a devastating accounting scandal with profits being over-stated by $1.2bn over over several years. In July, CEO Hisao Tanaka resigned, as did two previous CEOS and six other company officials.

There have been lousy results in its PC, TV and domestic appliance businesses and it has forecast a $4.5bn loss for the current fiscal year. The company is going to restructure these three parts of its business with thousands of job losses. An Indonesian TV plant will be sold. Damages-seeking lawsuits will be pursued against three former CEOs and two previous CFOs.

An image-sensor chip business has was sold to Sony Corporation in October. Toshiba is also retreating from the white LED business.

In the flash area, Toshiba is facing large capital investment needs with moves to 3D NAND and ReRam, plus disk drives will need to embrace costly heat-assisted magnetic recording (HAMR) technology to increase aerial density as current PMR technology is coming to the end of its ability to do so.

A question now hangs over Toshiba’s disk drive business. In that market it is a distant third to Western Digital and Seagate, the dominant disk drive twosome. However, if either Seagate or WD bought the Toshiba disk drive operation we would be facing a possible duopoly, and regulators might not like that prospect at all.

In general, as part of a Toshiba Revitalisation Action Plan, it has decided to focus on the Energy and Storage business and defocus from healthcare, looking for outside investors to contribute to research and development needs there.

Two semiconductor plants in Oita and Iwate prefectures could start producing LSI chips for external customers in another cost-cutting, money-raising move.

WD is buying SanDisk and received an assurance from Toshiba that the foundry output deal with Toshiba and SanDisk would continue after the acquisition. We can see now that Toshiba would not have wanted to unwind the SanDisk deal given the parlous state of Toshiba’s corporate finances.

It is also clearer why Toshiba did not mount its own bid for SanDisk although it was in the running earlier this year. Obviously it did not want to raise the $19bn cash needed, whereas WD could do so. ®

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