Qualcomm to invest $120 million in Japan's troubled Sharp

Tue Dec 4, 2012 8:37am EST
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TOKYO (Reuters) - Qualcomm Inc will invest as much as $120 million in Sharp Corp, a cash injection likely to make it the struggling Japanese TV maker's biggest shareholder, and to boost Sharp's efforts to remain viable.

As part of the agreement Qualcomm, through its Pixtronix subsidiary, will work with Sharp - which supplies screens to Apple Inc for its latest iPhone - to develop new power-saving screens based on Sharp's IGZO technology, Sharp said.

The two firms will also consider collaborating in the fabrication of chipsets.

Sharp's capital and business tie-up with the high-profile U.S. chipmaker may help reassure investors worried about the prospects of the debt-laden company that earlier this year averted failure with a $4.4 billion bank bailout.

"With this agreement Sharp will accelerate its strategy for growth in small-to medium-sized LCDs," the Japanese company said.

The investment from Qualcomm will help Sharp bolster its shareholder equity ratio, which at the end of September stood at 9.9 percent, half the 20 percent level usually considered the minimum for financial stability.

Qualcomm will make an initial investment of 4.93 billion yen ($59.91 million) by the end of the year in a private placement of stock at 164 yen per share, 10 yen less than Tuesday's closing price. That will give the U.S. company a 2.64 percent stake after dilution.

The timing and amount of the remaining investment has yet to be decided and will be conditional on Sharp returning to profit in the second half of the business year ending March 31.

Sharp, which posted a 168 billion yen operating loss in the six months ending September 30, forecast a loss of 155 billion yen for the full 12 months, meaning an implied profit of 13 billion for the second half. Achieving a profit would also allow its banks, including Mitsubishi UFJ Financial Group and Mizuho Financial Group, to justify their bailout.   Continued...

A logo of Sharp Corp is pictured at CEATEC JAPAN 2012 electronics show in Chiba, east of Tokyo, October 2, 2012. REUTERS/Yuriko Nakao