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Sharp Issues Warning over its Future

Sharp the electronics giant in Japan has warned that it has been very tough to raise capital amid its mounting losses

November 1, 2012 – Sharp the electronics giant in Japan has warned that it has been very tough to raise capital amid its mounting losses. The survival warning was issued as Sharp forecast a loss of $5.6 billion for their end of year March 31, 2013. The company has struggled due to falling sales and the increase of the yen. It has also had its credit rating slashed to a status of “junk.”

The company said it wanted to restructure the business and return it to profitability.

When a company has its bonds at “junk” status it means many institutions might not invest any longer in them, which makes it harder to raise new capital. The company said that it is in a circumstance where there is doubt about its ongoing concern. Analysts said due to its troubles, Sharp could find it difficult to survive over the long run.

On analyst in Tokyo said the Sharp would not fail within the year, but it does not have a viable business over the next three to five years. The analyst said the company did not have much time left so it needed to cut off the businesses it can, conserve some cash and produce a product that is very competitive.

The troubles Sharp is having are not ones that are isolated. Many of the big electronics giants in Japan have watched their fortunes fall over recent years. On Thursday, electronics giant Sony reported a huge loss of $192 million for their third quarter.

Panasonic, on Wednesday, also announced it expected a $9.65 billion loss for the current year. It previously had forecast a profit.

Electronics makers in Japan have lost sales due to a downturn in demand and the prices of TVs declining in many key markets.

In addition, the rising amount of competition from manufacturers of low-cost products coupled with an increase in the value of the yen, which has made goods from Japan more expensive, has also cost them to be less competitive.

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