Sharp Corp. President Takashi Okuda expressed confidence on Sept. 1 about reaching an agreement on a lifeline extended by Taiwanese component maker Hon Hai Precision Industry Co. through a capital deal by the end of September.
Okuda said the comprehensive agreement would also cover the sale of Sharp's overseas plants to Hon Hai as well as a strengthening of the two companies' partnership in the mobile phone sector.
Sharp and Hon Hai signed a contract in March in which the Taiwanese company would contribute about 67 billion yen ($855 million) by acquiring Sharp stock to be issued under a third-party allotment at a price of 550 yen per share. However, the subsequent plunge in Sharp's stock price due mainly to poor performances in its TV and liquid crystal display divisions led to a new round of negotiations over how much Hon Hai would actually contribute.
Okuda had wanted to reach an agreement with Hon Hai Chairman Terry Gou when he visited Japan in late August. However, Gou left Japan on Aug. 30 without an agreement.
"We were unable to finish the deal because we ran out of time, although both sides had made indications of wanting to resolve the issue," Okuda said in the Sept. 1 interview with The Asahi Shimbun.
Okuda added that negotiations over the capital contribution from Hon Hai would be part of an overall package that covered the entire business partnership.
The Sharp president indicated the amount of the capital contribution would be decreased in line with his company's current stock price, which has been hovering around the 200 yen level. Okuda also said Sharp planned to sell its TV plants in Mexico and China to Hon Hai.
"We will reach an agreement once we can talk at length," Okuda said. "I want to visit Taiwan as soon as possible."
Hon Hai has until the end of next March to make the capital contribution. With Taiwanese government authorities also expressing concern about possible losses for Hon Hai, the company has no reason to rush into an agreement with Sharp, so the negotiations could be drawn out.
One area that Okuda said Sharp would focus on in its partnership with Hon Hai is the smartphone sector. The two companies plan to begin manufacturing smartphones in China by the end of the year and sell the phones in Japan, Asia, Europe and the United States. The companies plan to double the number of units sold from the current level to about 12 million in a few years.
Okuda also said the company was considering further cuts in employee pay and bonuses as part of cost-cutting measures. As part of restructuring plans announced Aug. 2, the Osaka-based electronics manufacturer plans to eliminate 5,000 jobs in the current fiscal year.
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