The iPhone maker is actively looking at options for helping the troubled Japanese company by investing in its semiconductor unit, which has been put up for sale, according to people familiar with the matter. Apple is considering a range of options from partnering with Taiwan’s Hon Hai Precision Industry Co. to joining with Japanese investors on a bid, said the people, asking not to be named because the matter is private. SoftBank Group Corp. is considering getting involved in the Toshiba chip unit bidding and may cooperate with Hon Hai or Apple, the people said.
Apple’s entry into the auction may improve Toshiba’s prospects for emerging from a fiasco in its Westinghouse nuclear business that has led to billions of dollars in losses. Toshiba needs to raise money from the semiconductor sale to plug the hole in its balance sheet, but the bidding process so far has been rocky. The Tokyo-based company is wary of Hon Hai’s bid to take full control of the chips unit on its own because it anticipates Japanese and U.S. governments would object.
Mitsuhiro Kurano, a spokesman for SoftBank, declined to comment. Representatives for Apple in Japan didn’t respond to calls for comment.
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The iPhone maker’s move caps a hectic week for Toshiba. First, the 142-year-old electronics conglomerate warned it may not be able to continue as a going concern because of the Westinghouse losses. Then, amid signs of progress in the company’s efforts to sell its semiconductor unit, joint-venture partner Western Digital Corp. notified Toshiba such a sale may violate their contract.
“How do you even judge what happened this week for Toshiba?” said Kazunori Ito, an analyst at Morningstar Investment Services. “One positive is that the company showed third-quarter profits in the memory business, giving some assurance it may sell it for a good price. But there are so many negatives, I don’t even know where to begin.”
Toshiba’s memory chips are used in smartphones, personal computers and data centers, putting them at the heart of a shift away from hard drives. The semiconductor unit, which reported this week healthy profit growth in the memory unit, has fetched proposed prices of 2 trillion to 3 trillion yen, with Hon Hai, Korea’s SK Hynix Inc. and chipmaker Broadcom Ltd. emerging as the most aggressive bidders.
The twists and turns won’t go away anytime soon. Toshiba’s Westinghouse unit, which is behind a 716.6 billion yen impairment at the center of the imbroglio, is mired in lawsuits and has filed for Chapter 11 bankruptcy restructuring.
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On Tuesday, Toshiba took the unusual step of reporting third-quarter earnings without approval from its auditors. Toshiba said losses last year had left it with negative shareholders equity of 225.6 billion yen at the end of December. Toshiba has been at odds with PricewaterhouseCoopers Aarata over accounting at Westinghouse, where the billions of dollars in losses stem from cost overruns on nuclear construction projects.
This further jeopardized Toshiba’s listing on the Tokyo Stock Exchange. The TSE kept Toshiba on its list of securities on alert in a December announcement, after originally being included for overstating profits from 2008 through 2014. Toshiba last month submitted a report detailing plans to improve internal controls. If deemed insufficient, the company will face delisting.
Then in the middle of the week, news emerged that Steve Milligan, Western Digital’s chief executive officer, warned a sale may violate a joint venture it has with Toshiba. He wrote a letter to Toshiba’s board on April 9 advising them that they should negotiate exclusively with his company before any sale and that the proposed offers were more than the fair and supportable value of the chip business, according to a person familiar with the process.
Toshiba shares fell as much as 8.1 percent in Tokyo on Friday, but pared losses after NHK, Japan’s national broadcaster, reported on Apple’s plans. The stock fell 5.4 percent to 198.7 yen in Tokyo, leaving it down 30 percent this year.
Apple has not made a definitive decision about what role it will play in the chips sale, if any, the people said. The Cupertino, Calif.-based company has an interest in the unit’s future because iPhones and iPads use flash-memory. Apple could take a minority stake in the chip business with Japanese finance firms, as well as working with Hon Hai or SoftBank, the people said.
It’s not clear whether SoftBank is weighing an investment in the Toshiba chips unit or another role, the people said. The Tokyo-based company is in the process of raising a $100 billion fund and has yet to close the initial investment round.
“The share price right now is a pretty reasonable assessment of what Toshiba is worth without the flash memory business, assuming there is no delisting or bankruptcy,” Morningstar’s Ito said.