Losing Main Businesses

Toshiba Corporation, one of the major Japanese technology conglomerates, announced on Friday that it would reduce the volume of its business related to nuclear power generation. Although nuclear power generation had been the top business after acquisition of Westinghouse in 2006, Toshiba had to review it with huge amount of loss in construction of new plant in United States, which was revealed last year. One of the giant corporations in Japan, having been paralleled with Panasonic or Sony, is now struggling for survival.

Chairman, President and CEO, Satoshi Tsunakawa, told in his press conference that Toshiba would no longer put the highest priority in energy business on nuclear power plant. “We will separate nuclear power plant business from power generation section and put it directly under the president. This is a measure for thorough controlling of cost for construction project in U.S.,” told Tsunakawa.

Toshiba also decided to separate the business of flash memory from the corporation, which was the most major product in semiconductor business section. That plan will be authorized in shareholders general meeting on March 27^th and establish new company for flash memory. Toshiba has the biggest share of flash memory in the world except Samsung in South Korea and it estimates the value of new company to be as much as ¥1.5 trillion. Toshiba is going to accept offer of investment within 20% of whole share.

Management crisis of Toshiba appeared at the end of last year, when it announced estimation of large amount of loss in nuclear power plant business in U.S. The unexpected cost related to acquisition of CB&I Stone & Webster was proved to be ¥680 billion. That cost was stemming from stricter regulation for safety after the severe accident in First Fukushima Nuclear Power Plant.

Toshiba had been suffering from the scandal of inappropriate accounting two years ago. To revitalize its business, Toshiba had to cut off a part of its body. After accepting help from external investors for flash memory business, the benefit it can receive will be reduced, according to its share. Toshiba already gave up its original business of home appliances or cutting-edge medical equipment for rebuild its management.

The biggest concern is excess of debt in next accounting period in March. Although separation of flash memory will save the company from the crisis, Toshiba no longer has main body for earning major profit. It is not an unrealistic scenario that the conglomerate is disorganized.