Sharp Corp. based in Japan, announced it is purchasing Toshiba Corp’s personal computer business as well as issuing $1.8 billion in new stock to purchase back its preferred stock from different banks, which highlights the swift recovery made under Foxconn’s control.
The acquisition of the PC business at the price of $36 million establishes Sharp’s return to a market it left eight years ago. The relatively low cost of the unit underscores the dropping demand worldwide for PCs where today’s consumers are spending their money on smartphones.
The electronics maker based in Osaka can use Foxconn’s scale. Foxconn is the largest contract manufacturer in the world, and can produce PCs inexpensively, just the way it has done with televisions.
Sharp stated it would take a stake of 80.1% in the PC unit of Toshiba on October 1, and would keep the Dynabook brand.
Toshiba, which in 1985 launched the first laptop PC in the world, sold 17.7 million units per year during its peak in 2011. That figure has dropped to only 1.4 million units during 2017.
Acquired by Foxconn, known before by the name of Hon Hai Precision Industry, in 2016, Sharp has recently posted its first net profit in the last four years, in a large part helped by cuts in costs but also through the sales network of Foxconn throughout China.
Sharp announced that it will buy back its preferred shares, which had been issued to different banks in exchange for their financial bailout, to lower high interest payments.
Although this new issue is going to result in the dilution of over 10%, it should not be as great the possible dilution that could have taken place if the preferred shares were converted to regular stock.
Sharp stock pared losses after the news of the share issues to close lower by 4%, giving it a $12.8 billion market value.
Sharp was at one time considered the major supplier of smartphone displays and high-end TVs but has struggled in trying to compete with rivals in Asia before it was acquired by Foxconn.
It is seeking at this time the license of the Sharp brand for television in North America that it sold previously to the Hisense Group of China.
Embattled conglomerate Toshiba had to sell its television business to China’s Hisense and its successful white-goods business to Midea Group, also of China, as it desperately need funds to cover liabilities in the billions of dollars that came due to its nuclear unit in the U.S. that is now bankrupt.