Qualcomm, a US semiconductor company, has agreed a deal with Sharp to invest as much as $120 million in the Japanese electronics maker, which is struggling to turn around its balance sheet.
The investment will be used to jointly develop and commercialise high-quality colour and low-power displays.
By the end of the year, Sharp will sell 30.12 million shares in a private placement to Qualcomm at ¥164 a share, raising ¥4.9 billion ($60 million), the company said in a statement yesterday. The offer price represents a discount of 5.7% over Tuesday’s close, while the offer size will represent 2.6% of Sharp’s enlarged capital.
The details for the remaining investment are not set yet, subject to certain contingencies, the companies said.
Sharp and Pixtronix, a subsidiary of Qualcomm, have been working together on development projects for the past year-and-a-half in an effort to accelerate commercialisation of Pixtronix’s low-power micro-electromechanical systems (Mems) displays using Sharp’s Igzo (an oxide comprising indium, gallium and zinc) technology.
“Expanding our existing relationship with Sharp to jointly commercialise new Mems display technologies will help both companies realise their shared goal of driving high-performance, lower-power displays for a variety of devices, including smartphones and tablets,” said Derek Aberle, executive vice-president and group president of Qualcomm.
In early November, Sharp said it expected to book a net loss of ¥450 billion for the year to March 2013 — far bigger than the net loss of ¥250 billion it projected in August. It posted a net loss of ¥387.6 billion for the six months to September.
Sluggish demand for flatscreen TVs at home and in China, combined with a fall in product prices, has weighed on its business, as has the persistent strength in the yen and the slowdown in other emerging economies.
The company has been bleeding cash due to the huge losses, which have continued from 2011, and was possibly headed into bankruptcy.
“There exist conditions which might raise uncertainties about Sharp being an assumed going concern,” the company said at the time of its last earnings announcement.
To generate cashflow, the company is implementing a series of management measures such as calling for voluntary retirement, cutting salaries, reducing total expenses, achieving a proper inventory level, selling assets and reducing capital investments.
“The company will give the first priority to recovering earnings by continuously promoting business collaboration at a global level,” it has also said.
Still, investors’ fears have weighed heavily on the company’s stock, which has been on a downtrend during the past few years. It is down 74% so far this year, compare to a gain of nearly 12% on the benchmark Nikkei 225.
Sharp is not alone, however.
In late October, Panasonic slashed its full-year sales forecast, citing worsening market conditions in digital consumer products and the slowdown in emerging economies. It is expected to book a net loss of ¥765 billion for the year, a deterioration from the previous forecast of a ¥50 billion profit. The company’s stock is down about 38% year-to-date.
Sony is sticking to its full-year forecast for net income of ¥20 billion. But it has slightly lowered its sales forecast to ¥6.6 trillion from the previous projection of ¥6.8 trillion, citing downward revisions in annual unit sales forecasts of key products due to the deceleration of the global economy. Sony’s stock has shed nearly 43% so far in 2012.
“With this agreement, Sharp will accelerate its strategy for growth in small to medium-sized LCD business with Igzo-based display technology as its core, and expand its revenue and corporate value,” Sharp said in the statement yesterday.
