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 Home > News > Optical Storage > Toshiba...
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Friday, March 07, 2003
Toshiba aims to double profit, become DVD leader

Japanese electronics conglomerate Toshiba Corp. said on Friday it was aiming to double its group operating profit and become the world's leader in DVD recorders under a three-year business plan.

Japan's biggest chip maker said it would reshuffle its operating divisions and shift its home appliance business to a new subsidiary, but it stopped short of a major shake-up.

"At this time we are not planning any major operational reforms," Toshiba President Tadashi Okamura told reporters.

Since the onset of the IT slump more than two years ago, Toshiba has cut 10 percent of its work force and exited the computer memory chip business, where it was once a world leader.

But many analysts say the company, with a product line ranging from microprocessors to nuclear power equipment, still has some unprofitable operations that it should abandon and must further sharpen its focus on potential growth areas.

Okamura sent mixed signals on the company's stance on reform.

While insisting that no further job cuts or big restructuring moves were planned, he said any division unable to meet profit targets could eventually be scrapped or sold.

The three-year plan set aside 20 billion yen ($170 million) a year for such restructuring moves, he added.

The plan targets a consolidated operating profit of 270 billion yen in the business year starting in April 2005, up from 130 billion yen projected for the current year to March 31. Revenues are seen rising to 6.6 trillion yen from 5.65 trillion.

The home appliance division, which posted an operating loss of 300 million yen ($2.56 million) on revenues of 158 billion yen in the latest quarter, will join a handful of other units in a wholly owned subsidiary.

Okamura said the split would give the new unit more freedom to enter alliances and cooperative arrangements with other companies, although he dismissed the possibility Toshiba was preparing to sell it or merge it with another firm.

Toshiba's peers, including Hitachi Ltd., NEC Corp and Fujitsu Ltd., have also been selling or splitting off troubled or non-core businesses, but analysts complain the moves have been too slow and too timid.

Toshiba also plans capital expenditures of 840 billion yen over the next three years, with more than 75 percent earmarked for core, high-growth areas such as semiconductors.

It announced plans in December to spend 350 billion yen on two state-of-the-art plants to make memory chips and complex logic chips for mobile phones, digital cameras and other consumer electronics.

Rising optimism about its chip operations, including hopes for closer ties with consumer electronics giant Sony Corp (news - web sites), helped spur a rally in Toshiba's shares from two-decade lows in mid-November, although the momentum has since ebbed.

Toshiba's shares closed Friday trade down 2.37 percent at 330 yen, in line with a 2.24 percent fall in the Tokyo Stock Exchange's electrical machinery index.

Toshiba will also focus on cutting-edge consumer electronics such as DVD recorders, a small but fast-growing market where it pioneered much of the technology but currently lags Matsushita Electric Industrial Co in market share.

Okamura said Toshiba's restructuring efforts significantly bolstered its profitability despite the lingering IT slump.

"It appears as though we can reach our target of returning to a net profit this business year," he said, adding the company plans to pay a year-end dividend of three yen in 2002/03.

Toshiba has targeted a 23 billion net profit this year compared with a record 254 billion yen loss last year.

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