Qualcomm Said to Agree to 5 Billion Yen Investment in Sharp

Qualcomm Said to Plan 5 Billion Yen Investment in Japan’s Sharp
The Osaka-based company is the worst performer of 2102 among more than 1,600 stocks in the MSCI World Index of developed countries. Photographer: Tomohiro Ohsumi/Bloomberg

Sharp Corp., the Japanese TV maker that warned last month about its ability to survive, agreed to sell a stake in itself to Qualcomm Inc. and team up with the U.S. company to make displays, two people familiar with the plan said.

Sharp plans to make an announcement today on the agreement, which includes selling 5 billion yen ($61 million) of new shares to the San Diego-based chipmaker this year, one of the people said, asking not to be named because the plan hasn’t been made public. That would give Qualcomm a 2.6 percent stake in Sharp, based on its 191 billion yen market value yesterday.

Japan’s largest liquid-crystal displays maker hemorrhaged 103 billion yen in cash from operations in the first half of its fiscal year amid dwindling demand and competition from Samsung Electronics Co. Sharp has failed to win a planned investment from Taiwan’s Foxconn Technology Group after the Osaka-based company widened its full-year loss forecast.

“This investment is good news for Sharp,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo. “However, it won’t have sufficient impact to improve the company’s situation dramatically. It’s only symbolic.”

Miyuki Nakayama, a Tokyo-based spokeswoman for Sharp, and Clare Conley, a San Diego-based spokeswoman for Qualcomm, declined to comment.

Energy-Efficient Displays

Sharp rose 1.7 percent to 175 yen as of the midday break in Tokyo trading, compared with a 0.4 percent drop in Japan’s benchmark Nikkei 225 Stock Average. Sharp has declined 74 percent this year, making it the world’s second-worst performing major stock.

The planned tie-up was reported earlier today by the Nikkei newspaper. The two companies will jointly promote development of energy-efficient displays for smartphones, the report said, without saying where it got the information.

Qualcomm may invest an additional 5 billion yen in Sharp if the partnership turns out to be successful, the report said.

Even an investment of 10 billion yen “is too small,” said Mitsushige Akino, Tokyo-based chief fund officer at Ichiyoshi Asset Management Co., which oversees about 30 billion yen. “Even if 10 companies invested 10 billion yen each in Sharp, it would still only be 100 billion yen. It’s meaningless.”

‘Material Doubt’

Sharp said last month there was “material doubt” about its ability to survive after forecasting a record 450 billion-yen full-year loss on falling demand for its display panels.

The maker of Aquos TVs reached a preliminary agreement in March to sell a 67 billion-yen stake in itself to Taipei-based Foxconn. A decline in Sharp’s share price prompted renegotiations of the terms, and the Japanese company has said the talks may continue at least through March.

Sharp was in talks with Round Rock, Texas-based Dell Inc. for an investment of as much as $240 million, the Wall Street Journal reported last week, without saying where it got the information. Sharp wasn’t the source of the report and nothing has been decided, Atsushi Yoshida, a spokesman for the Japanese company, said at the time. Dell declined to comment, Kim Otzman, a spokeswoman for the maker of Latitude computers, said.

Sharp President Takashi Okuda said Nov. 1 the company is considering various partnership options.

Kyodo News said Nov. 13 Sharp was in final talks with Intel Corp. to get an investment of as much as 40 billion yen. Sharp wasn’t the source of information for that report and nothing has been decided, the Japanese company said in a statement Nov. 14. Chuck Malloy, a spokesman for Santa Clara, California-based Intel, declined to comment at the time.

The Asahi newspaper said Oct. 26 Sharp was seeking capital alliances with Hewlett-Packard Co., Intel, Microsoft Corp., Google Inc. and Apple Inc., without saying where it got the information. Sharp denied the report at the time.

The 100-year-old inventor of mechanical pencils put up its Osaka headquarters and some plants as collateral in September to win bank loans after its credit ratings were cut to junk.

Within six months of assuming office, Okuda, 59, announced eliminating jobs for the first time in six decades after widening the company’s loss forecast on plunging demand for TVs.

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