Sharp Corp., maker of Aquos televisions, said it will cut 5,000 jobs after widening its annual loss forecast to 250 billion yen ($3.2 billion) as demand for its sets slumped.
The workforce reduction, the company’s first since 1950, is part of a plan to reduce fixed costs by 100 billion yen, the Osaka-based company said in a statement today. The loss outlook compares with the average 65.3 billion-yen loss estimate of 16 analysts compiled by Bloomberg, and is more than eight times the company’s previous projection of a 30 billion-yen loss.
The Japanese electronics maker joins rivals Sony Corp. and Panasonic Corp. in planning job cuts following record losses caused by lower TV prices and demand, and a yen trading near its postwar high, reducing the value of overseas earnings. The steps come after Sharp unveiled a plan to separate its TV panel unit and turned to Foxconn Technology Group and founder Terry Gou for 133 billion yen in funding after forecasting its second straight annual loss.
“We want to recover earnings by undertaking unprecedented restructuring measures swiftly,” Tetsuo Onishi, managing director in charge of accounting, told reporters today in Tokyo.
Foxconn’s flagship Hon Hai Precision Industry Co., the assembler of Apple Inc. iPads, will start buying panels from Sharp’s display venture this quarter, three months earlier than planned under a March agreement, Sharp President Takashi Okuda said in June.
“Investors are waiting to confirm progress in what the management promised to do in June,” said Keita Wakabayashi, a Tokyo-based analyst at Mito Securities Co. “Whether teaming up with Hon Hai will reward investors or not depends on the Taiwanese group’s marketing power of large panels.”
Sharp’s net loss was 138.4 billion yen in the three months ended June 30, widening from 49.3 billion yen a year earlier, the Osaka-based company said. The average of four analysts estimates compiled by Bloomberg was a loss of 76 billion yen.
The large LCD-making plant, in which Gou gained a 37.6 percent stake, will increase its utilization rate to 90 percent this year to meet orders from Foxconn, Okuda said.
The LCD operation will probably lose 105 billion yen this fiscal year, Sharp said today. That compares with the 10 billion-yen projected by the company three months ago.
Full-year LCD sales will probably be 8 million units, compared with an earlier projection for 10 million.
The electronics maker promoted Okuda, 58, in April to replace Mikio Katayama, who became chairman, after predicting the worst loss in its 100-year history amid slumping demand.
Sharp shares last month fell to their lowest since 1975 after the Nikkei newspaper reported the company will probably post a quarterly loss and plans to cut jobs for the first time in more than half a century.
On July 27 Sharp’s BBB+ long-term credit rating was put on review for a possible downgrade at Standard & Poor’s because of deteriorating TV and panel businesses. Refinancing risk for the company’s convertible bonds maturing in September 2013 will also be assessed, S&P said.
The stock rose 0.8 percent to close at 267 yen in Tokyo trading before the earnings were released, trimming its loss this year to 60 percent. Sharp has the biggest percentage decline on the benchmark Nikkei 225 this year, which has added 2.3 percent.
The operating loss will probably be 100 billion yen this fiscal year, compared with the company’s previous forecast for profit of 20 billion yen, Sharp said.
Billionaire Gou invested 66 billion yen for the 37.6 percent stake in Sakai Display Products Corp., which runs a 10th-generation panel plant, the LCD industry’s most advanced. Foxconn Group’s planned purchase of a 9.9 stake in Sharp for 550 yen apiece, the other part of the March agreement, is pending approval.