Is Sharp losing its edge?

Revenues fell off a cliff and losses have mounted in its latest earnings report, while Sharp warned that its ability to continue as a "going concern" is in doubt.

(Credit: Sharp)

Sharp is looking distinctly less keen these days. Not only are its losses "huge", but the company has warned investors that there is "material doubt" that it may be able to continue as a "going concern". These are never good words to hear from a major company.

The ailing Japanese consumer-electronics manufacturer saw sales drop 16 per cent year-over-year to 1.1 trillion yen (AUD$13.1 billion) in the six months ended 30 September. The company's net loss widened to 387.6 billion yen, dwarfing last year's six-month loss of 39.8 billion yen.

"Sharp is in circumstance in which material doubt about its assumed going concern is found," the company said in a statement, essentially telling investors that it doesn't know how much time is left.

At the same time, Sharp insisted that it restructuring efforts, which include massive layoffs, could help the company generate more cash flow and attract creditors to help it raise funds. If that happens, Sharp expects to "secure the necessary credit line, supported by financial institutions, and attempt to improve business performance, and regain trust by monitoring the progress of this plan and implementing it steadily."

If all of that comes together, Sharp believes that it can stay afloat.

Still, Sharp's restructuring efforts are a mammoth task. The company is planning to cut several thousand workers and is trying to offload assembly plants all over the world. Meanwhile, it's trying to supply companies like Apple with mobile displays. However, its production efforts hit a snag earlier this year on the iPhone 5, pushing back shipments a few weeks and leaving investors to worry if it could fulfil the demand.

Sharp's issues are nothing new; the company has been reassuring investors for months now about its ability to turn things around. Yet, it keeps missing its own forecasts. During the six-month period ended 30 September, for example, Sharp only expected to lose 210 billion yen and nearly doubled that loss.

Sharp has also been forced to revise its full-year outlook for the fiscal year ending March 2013. The company now says that its full-year revenue will hit 2.46 trillion yen, down from a previously forecast 2.5 trillion yen. Sharp expects its losses to widen from 250 billion yen to 450 billion yen.


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