Sharp’s Financial Woes Continue As It Misses Deadline For $120M Qualcomm Investment

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Samsung Grows An Ego

In another setback for the Japanese electronics giant, Sharp said it will miss a March 29 deadline for the second half of a $120 million investment from Qualcomm after failing to complete a plan to begin fabricating power-saving screens. Though jointly-developed by the two companies, the screens are based on IGZO technology developed by Sharp, Japan’s leading LCD maker.

Qualcomm paid half of the $120 million back in early December, when it acquired a stake in Sharp one month after the Japanese electronics company issued a warning about its ability to keep operating.

At the time, Qualcomm said Sharp would also have to make an operating profit in the second half of its business year and have at least $1.05 billion of net assets. Sharp spokeswoman Miyuki Nakayama told Reuters that the financial targets are not the reason for the delay, and that the two companies are now working toward a June 30 deadline to meet conditions for the second payment.

Sharp is already under financial pressure as it looks to repay a $2.1 billion convertible bond in September, and is having difficult raising capital since its credit rating was cut to “junk” status by Standard and Poor’s and other ratings agencies last fall. In order to meet its financial obligations, analysts told Reuters that they expect Sharp to resort to equity financing. The Osaka-based company has already put up all the land and buildings it owns in Japan (except for properties it is trying to sell) up as collateral for up to US$1.9 billion in loans.

Sharp also failed to renegotiate an agreement for Taiwan’s Hon Hai Precision Industry Co to buy a 9.9 percent stake, with Asahi newspaper reporting that a March 26 deadline is expected to pass with no new agreement in place. The deal stalled after Hon Hai demanded a degree of management control while also seeking to lower the $708 million Sharp was seeking.

Earlier this month, Sharp did manage to sell a three percent stake to Samsung Electronics after the Korean giant agreed to invest $110 million in Sharp in return for panel supplies. Sharp, however, also declined an offer from Samsung to buy its copier business as part of that deal, though the Japanese company did not disclose why it refused the offer.

Sharp is not the only Japanese electronics company facing financial difficult due to a decline in flat-panel display sales, competition from Samsung, and a strong yen, which makes product pricing less competitive overseas. In January, Sony announced that it was selling its NY headquarters for $1.1 billion, after four straight years of losses and cutting 10,000 jobs.