Toshiba Corp. said Wednesday it is considering spinning off its mainstay flash memory business, a move that could help it generate cash through the sale of a stake in the new entity to offset losses in its U.S. nuclear business.
In a statement released following reports on the matter, the embattled Japanese electronics manufacturer said, “Toshiba positions its memory business as a focus business, and is studying the possibility of splitting it into a separate company,” emphasizing nothing has been decided yet.
Depending on its U.S. nuclear business losses, Toshiba, which is struggling to emerge from an accounting fraud scandal, could see liabilities exceed assets, some analysts said.
The company had initially aimed to return to profitability in the year to next March after posting a second straight net loss in the previous business year, as it undertook sweeping restructuring after revealing it had overstated profits for years.
Toshiba has been focusing on nuclear power but it has struggled to secure orders for new plants both at home and abroad, particularly since the 2011 Fukushima nuclear disaster. Toshiba said last month it was facing a multibillion-dollar write-down at its U.S. nuclear unit Westinghouse Electric Co.
A Toshiba executive said recently that the company was considering financial assistance from its main banks.
The company will look for a partner to sell a stake in the new chip entity and aims to use the proceeds to absorb the losses from the nuclear business, a source familiar with the matter said Tuesday.
Toshiba is expected to decide on whether to spin off the memory business after determining the size of the losses from the nuclear business, possibly before the end of this month, according to the source said.
The company’s advanced NAND-type flash memory business commands a leading global market share and is estimated to be worth 2 trillion yen (about $17.7 billion). The memory, which is used in devices such as smartphones, is produced at a plant in Yokkaichi, Mie Prefecture.
A plan is being floated to have Western Digital Corp. of the United States, which has jointly invested in manufacturing facilities at the Yokkaichi plant, take a stake in the potential spinoff, the source said. But since that would take time as it would require approval from antitrust regulators, Toshiba may explore the possibility of receiving investment from a third party, such as an investment fund.
If Toshiba posts excessive liabilities for the year through March, it could be downgraded to the Tokyo Stock Exchange’s Second Section from the First Section, making it harder for the company to get back on track.