A Tsunami, And The Nuclear Meltdown: Toshiba

That is right: Toshiba.

The long, strange and twisted story from once a great company from the Land of the Rising Sun.

The four subsidiaries will be (1) infrastructure (including water treatment and railways); (2) energy (including thermal and nuclear power); (3) electronics (including data storage); (4) information and communications.

With the exception of the new energy subsidiary, the rest of the spin-offs would come into being in July 2017. Energy is set to be in effect in October.

BreakingEnergy.com, May 2, 2017 – Toshiba to Split into Four Subsidiaries.

What?!!!

Toshiba Corporation... commonly known as Toshiba and stylized as TOSHIBA, is a Japanese multinational conglomerate headquartered in Tokyo, Japan. Its diversified products and services include information technology and communications equipment and systems, electronic components and materials, power systems, industrial and social infrastructure systems, consumer electronics, household appliances, medical equipment, office equipment, as well as lighting and logistics.

Wikipedia – Toshiba.

That Toshiba?!

One of Japan’s former tech giants is in the emergency room and struggling to stay alive, saying earlier this month that it doubted its “ability to continue as a going concern.” Its most recent hospital visit was caused by a disastrous acquisition. But its overall health has deteriorated over the past two decades, as it failed to age gracefully into a new global economy.

Quartz.com, April 26, 2017 – It took Toshiba 70 years to reach its peak—and just a decade to fall into an abyss.

What follows are a couple paragraphs in same vein that continue the “emergency room” metaphor.

Then a nice historical review.

Go back eight decades, and Toshiba was at the forefront of technology discovery. Although its roots originate in the late 1800s, when the son of a tortoise-shell craftsman began developing telegraphic equipment, the present-day company was founded in 1939 as part of a merger between two Japanese companies, Tokyo Electric Company and Shibaura Engineering Works.

The companies were the innovators of their day. In 1921 Tokyo Electric invented the world’s first double-coiled light bulb, an innovation that remains in most incandescent bulbs. In the mid-20th century, the merged entity went on to push forward the technology in videotape recorders, television sets, air conditioners, and even mechanized mail-processing equipment.

(same)


… continued …

a reply to: TEOTWAWKIAIFF

Toshiba has long been a name I've trusted without regard.

Next is the story of the T1100 laptop that came out in the mid-80s and started the entire laptop business. Because it was new (back then) and worked with Windows the stated goal of selling “10,000 units” (same) being not only reached and surpassed the economic fate of Toshiba as a world leader seemed indestructible.

Practically as a side note, an employee made NAND memory. A weird little oddity that was to become used in nearly all modern aspects of life: mobile phones, tablets, guitar effects, USB memory sticks, MP3 players, computer boot enhancers.

Toshiba became one of the world’s top laptop vendors in the 1990s and 2000s, while maintaining its lead in NAND flash. Its computers filled the aisles of electronics retailers worldwide—by 2007, the company was responsible for 17.8% of all computer sales in retail stores in the US.

(same)

What happens next is a symptom of large companies and being a slave to the investors and the almighty bottom-line. What do you do when your computer sales are slumping??

Lie.

In 2015, an investigation spurred by a whistleblower revealed that the company had overstated operating profits by as much as $1.2 billion over the years of the PC business’s stark decline.

(same)

I mean, “overstate profits.” You cannot tell the truth even if you do a little investigation and realize that Toshiba pulled out the Japanese computer market… as long as the façade looks good you can keep going!

Then, in a feel good move, go out and acquire another company!

In 2006 the company paid $5.4 billion to buy Westinghouse, the US-based builder of nuclear power facilities.

(same)

See! Everything is alright! Except Toshiba had never run nuclear reactors, built them, or had dealings with regulators, laws, local zoning, the EPA, the NEA, and slow pace of the US government in general. A few years go by… a few more… then

The 2011 earthquake off the Pacific coast of Tōhoku… was a magnitude 9.0–9.1 (Mw) undersea megathrust earthquake off the coast of Japan that occurred at 14:46 JST (05:46 UTC) on Friday 11 March 2011…

The tsunami caused nuclear accidents, primarily the level 7 meltdowns at three reactors in the Fukushima Daiichi Nuclear Power Plant complex,

Wikipedia – 2011 Tōhoku earthquake and tsunami.

The rest of the world becomes very fearful of nuclear fission reactors in general. The radiation is still spewing into the Pacific. Westinghouse goes bankrupt forcing economic pressures on it’s parent company, Toshiba.

Toshiba’s subsequent write-down from that development came in at over $6 billion (pdf), more than it paid for Westinghouse in the first place. It’s possible it will book a net loss of $9.9 billion (paywall) for the fiscal year ending on March 31, 2017. The fallout has caused the company to consider selling its NAND flash business—its only division with reasonable prospects for survival—and has led it to spar with auditors and delay posting results for its just-ended fiscal year. If it doesn’t do so by May 15, it risks getting delisted.

(Quartz)

That is what happened. The once mighty Toshiba might go under. It might split into 4 subsidiary companies. Western Digital had planned on buying the NAND business but has gotten cold feet.

The Quartz article is a nice long read. There is a little more in there if you have the time. I figured this needed some context and being busy this morning I haven’t kept up on this day’s posts. But I kind of needed a step back from WW3 and this fits the bill!

-end-

They buy one shaky investment (Westinghouse) and the liabilities dragged the whole company down. By then it becomes impossible to split themselves up into a healthy company with all the profitable divisions and a toxic company with all the loss making divisions. So it's going to be a liquidation sale.

Remember this advert?

adland.tv...

a reply to: stormcell

YouTube - Tosh Got A Toshiba


That was a long time ago! Nearly forgotten in the beer-fed neurons! I love the techno music in the ad!



The real bad part is they delivered a supercritical carbon dioxide turbine to the pilot plant in Texas. Where does that niche knowledge go to if they split? I was hoping the demonstration of a closed fuel burn cycle SCO2 power plant would be a game changer. Now it is up in air. May 15 is not that far away.

Unbelievable. 2nd. More radiation

I'm using a Toshiba laptop right now.

a reply to: dfnj2015

The article says that when the internet boom happened people bought cheep not brand names and that caused their sales slump.

The rest is bad timing. I wonder if this can be considered "economic fallout" from the earthquake? A multi national corporation folding is huge.

a reply to: randyvs

Their excavators have always been top-notch in my experience. Hitachi stuff has been good to me also.
Also John deere and case for farm work.

This has nothing to do with Toshiba. But since it was used as a source for this tale, I'll add it here.

And it is funny!

Quartz.com - How to read 40 earnings reports in two minutes.

a reply to: randyvs

A foot note to the Toshiba story..

The Westinghouse operation was sold to Toshiba by British Nuclear Fuels.

en.m.wikipedia.org...

Excerpts from the Wikipedia page...

"The sale surprised many industry experts who questioned the wisdom of BNFL selling one of the world's largest producers of nuclear reactors shortly before the market for nuclear power was expected to grow substantially; "

"Reasons in favour of a sale were: The commercial risk of the company's business in Asia may have been too high for a company then owned by taxpayers; if Westinghouse won the bid for any new nuclear stations in a UK competition, questions may be raised of favouritism, but if it lost, it might have been seen as a lack of faith in its own technology. Finally, the record of UK governments building nuclear plants had been a commercial disaster."

So, the Brits jumped out and Toshiba jumped in. Maybe the Brits jumped because Toshiba offered $5Bn versus an expected $2Bn!

Perhaps ironically, when it came to the build of a (controversial) new Nuclear Power station in the UK - Hinkley Point - Westinghouse was overlooked in favour of a French-Chinese consortium, despite being no longer British owned.

en.m.wikipedia.org...

"...Financing of the project is still to be finalised, but the construction costs will be paid for by the mainly state-owned EDF of France and state-owned CGN of China..."

I do wonder if this new Nuclear Power station was at one time a sweetner of some kind in the BNFL-Toshiba deal, and if the burden of Fukishima didn't count heavily against Westinghouse, when the final decision on the new power station came to pass.

All in all it seems bad management courts bad luck. I think that's the Toshiba lesson.

Toshiba’s partners are preparing for the electronics giant for a possible bankruptcy filing in Japan, The Wall Street Journal reports, a move that would add to the uncertainty surrounding two nuclear power plants under construction in the U.S.

utilitydrive.com, May 12, 2017 - Toshiba said to be preparing for bankruptcy as Southern faces Vogtle deadline.

Wow. This is like watching a train wreck--I can't stop watching!

I really hope Toshiba does not file for bankruptcy. I would think if the US can bail out the financial sector then Japan could help out one of their largest companies.