By Associated Press
TOKYO (AP) — Embattled Japanese technology conglomerate Toshiba said Friday it is restructuring to improve its competitiveness, spinning off its energy infrastructure and computer devices businesses.
The energy infrastructure spinoff will include Tokyo-based Toshiba Corp.’s (TKS:JP:6502) nuclear power operations, including the decommissioning efforts at the nuclear plant in Fukushima that suffered meltdowns after an earthquake and tsunami in March 2011.
The energy business will also include the company’s sustainable energy and battery businesses. Its annual sales total about 2 trillion yen ($18 billion).
The other spinoff and stand-alone company encompasses Toshiba’s computer devices and storage operations, with annual sales of 870 billion yen ($7.6 billion).
Toshiba will remain a third independent company, holding what’s left, such as its flash memory company Kioxia Holdings Corp. and Toshiba Tec Corp., which makes office equipment.
Such a major restructuring is unusual for a big Japanese company. But Toshiba is not alone in deciding that a sprawling conglomerate may not be the best fit for the times.
Earlier this week, General Electric announced it was dividing itself into three public companies, focused on aviation, health care and energy. Like Toshiba, GE (NYS:GE) struggled under its own weight and decided to streamline its main business after a long review.
Toshiba said its restructuring would be completed by March 2024. Separating the financial results of the companies will start from this fiscal year, it said.
Chief Executive Satoshi Tsunakawa said the two kinds of businesses being spun off were very different, with the business cycle for devices much faster than that for infrastructure, and the device business requiring heavy investments.
“It will unlock immense value by removing complexity, it enables the businesses to have much more focused management, facilitating agile decision making, and the separation naturally enhances choices for shareholders,” Tsunakawa said of the new structure.
The move still needs shareholders’ approval. A shareholders’ meeting will be held early next year, Tsunakawa said.
In a statement to shareholders, Toshiba said its “bold and ambitious plan” followed a five-month review by the board’s strategy committee.
The management line-ups and names for the spinoffs will be announced later, according to Toshiba. It said adjustments to its operations and workforce were still undecided.
Earlier Friday, Toshiba issued a statement promising to beef up its corporate governance. An investigation by a governance group found no illegalities, but some managers engaged in dubious practices related to blocking the views of some shareholders.
Toshiba has periodically run into governance problems, including a scandal in 2015 over accounting books that were doctored for years to inflate earnings.
Since then, the company has eliminated thousands of jobs and sold off chunks of its sprawling business.
Also Friday, Toshiba reported a 41.8 billion yen ($367 million) profit for July-September, more than double the 14.8 billion yen profit a year earlier.
Officials said the better results reflected restructuring efforts and improved sales. Quarterly sales rose 6% on year to 818.5 billion yen ($7.2 billion).
Toshiba forecast a 130 billion yen ($1.1 billion) profit for the fiscal year through March 2022, raising its earlier projection by 20 billion yen ($175 million), and up from 114 billion yen in profit posted a year earlier.