Critical Analysis Paper
Sharp’s third quarter results showed very disappointing performance. The company reported a ¥249.1 billion ($3.12 billion) loss. Moreover, it is forecasting a ¥450 billion, or $5.6 billion, loss for the fiscal year through 2013. Apparently, the company is burning through more cash than it is generating and having difficulty in securing short-term financing. Also, the company is considering selling some holding in other companies and office building in Tokyo. Furthermore, it’s thinking to sell television assembly plants in Mexico and China, which would reduce its payroll by 3,000 jobs, added to the 5,000 positions assigned for layoff earlier this year. The company has decided to cut the current Sharp’s payroll by 14%. In addition, Sharp's shares are down 75% this year. This paper will conduct a situation analysis of internal and external environment of Sharp’s weak performance. It will also summarize the primary causes of company’s weak performance. Internal Analysis
Currently the company faces two problems: it is under pressure to reduce interest-bearing debt, which increased to ¥1.25 trillion since June 2011 and, also, needs to repay ¥200 billion of convertible bonds that mature in September 2013 (Daisuke Wakabayashi). At the end of June 2012, the company’s cash, accounts receivable, inventory and other assets couldn't cover its short-term liabilities. The company is struggling to raise cash. Sharp's net loss for the first half included ¥84.4 billion in restructuring costs, including a ¥30.1 billion impairment of assets in its solar batteries unit, a ¥53.4 billion write-down on inventory, and a ¥61.0 billion write-down on deferred tax assets. Also, at the end of September, the Sharp's shareholder equity ratio fell to below 10 percent, which is half the rate generally considered a healthy minimum. Sharp remains highly dependent on short-term borrowings. Weak internal cash flow has forced the...
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