Business / Corporate

New Toshiba CEO says chip unit sale will proceed despite eased delisting fears

by Shusuke Murai

Staff Writer

New Toshiba Corp. Chairman and CEO Nobuaki Kurumatani emphasized Tuesday that the company does not intend to change plans to sell its lucrative memory chip unit even now that it has staved off financial woes.

“I’ve experienced a lot of M&As, and it’s common sense that stakeholders need to work sincerely toward closing the deal once they’ve signed a contract,” Kurumatani said during an interview at the firm’s headquarters in Minato Ward, Tokyo.

The new head, who had worked exclusively in banking before taking over at the struggling technology giant Sunday, added that he aims to transform the 143-year-old electronics firm so that the lion’s share of its long-term revenue falls under “recurring” business models.

“The memory business is indeed extremely profitable at the moment, but other businesses can be more stable even though they’re not as profitable,” he said. “We can’t fully assess the value of a business just by its profitability.”

Kurumatani’s remarks follow a failure by the struggling conglomerate to finalize before its end-of-March deadline a deal to sell memory unit Toshiba Memory Corp. to a Japan-U.S.-South Korea consortium led by U.S. investment fund Bain Capital for ¥2 trillion.

Selling the prized memory unit was initially thought to be essential to offset a negative net worth by the end of March and avoid being delisted by the Tokyo Stock Exchange. But the company managed to eliminate the risk of delisting by raising ¥600 billion through a third-party allocation of new shares in December to 60 overseas investment funds.

The unit sale has now been delayed due to antitrust screening in China. The contract stipulates that Toshiba could cancel the deal if it wasn’t finalized by the end of March, but the firm said in a statement Friday it would continue proceeding with the sale even though the deadline has passed.

With the firm’s financial standing now improved, the question arose whether the company really needs to sell its lucrative memory business. Income from the unit could be a major driver pushing forward recovery from the company’s financial crisis, which stemmed from massive losses at Westinghouse Electric Co., Toshiba’s former U.S. nuclear unit, that filed for bankruptcy protection in March 2017.

But Kurumatani countered such speculation and maintained that Toshiba will drive the sale forward unless it fails to pass screening by antitrust authorities.

“Some people, including investors, say we’d do better sticking with the profitable memory business, while others say we’d do better not to. I think it’s down to us managers to decide what kind of company we aim to become,” he said.

A former president of CVC Asia Pacific Japan and former vice president of Sumitomo Mitsui Financial Group, Kurumatani succeeded Satoshi Tsunakawa as Toshiba’s CEO. Tsunakawa will continue in the role of president and also became chief operating officer.

Kurumatani said the company is working to develop a strategic plan for revitalization to regain strength in its core operations. The plan will be announced sometime this year, he added.

Toshiba is set to issue its annual report for the last financial year May 15.