Sharp shares hit by reports of Hon Hai deal rethink

Aug 06, 2012
Customers watch televisions under a Sharp logo at an electrical shop in Tokyo in February 2012. Shares in Japan's Sharp, which slumped 28 percent at the end of last week after a poor earnings report, fell further Monday after Taiwan's Hon Hai Precision said it would renegotiate a deal to invest in it.

Shares in Japan's Sharp, which slumped 28 percent at the end of last week after a poor earnings report, fell further Monday after Taiwan's Hon Hai Precision said it would renegotiate a deal to invest in it.

The electronics giant closed down 5.72 percent at 181 yen, its lowest level in four decades, after Friday's tumble caused by the announcement Thursday that it lost $1.77 billion in April-June and warned of a bigger full-year shortfall than first expected.

Hon Hai, parent company of manufacturing giant which builds gadgets for Apple, said Friday it would seek to change a agreed in March that would see it take a 10 percent stake in for 550 yen per share.

The firm's reached 570 yen days after the investment plan was unveiled.

In a media interview in Taiwan aired Sunday, Hon Hai chairman Terry Gou said: "I had not expected the huge loss of Sharp."

But he also said he has been assured by Sharp that "the price is renegotiable", boosting Hon Hai shares Monday.

Gou said he hoped to complete the investment in Sharp by March 31 2013, a deal he said will be a win-win situation as Sharp had the technological expertise while Hon Hai had access to huge markets.

Sharp on Friday denied news reports that the deal was being reviewed, confusing the market and forcing investors to the sidelines, traders said.

"Investors are saying 'I don't care about the fine details, I just want out'," CLSA equity strategist Nicholas Smith said.

"Nobody doubts that Sharp has great technology, but the capital alliance with Hon Hai could very well mean that a lower cost-base firm will just walk away with Sharp's bread-and-butter. Buying on the dip is OK for cyclical stocks, but this isn't a cycle," he said.

The deal between Hon Hai and Sharp came as Japan's once mighty electronics sector struggles to haul itself out of the dire straits in which it has languished for several years.

Japan Inc. has suffered from a loss of manufacturing work to rising Asian rivals, while it has fallen behind American competitors on the cutting edge of gadgets and software, while the strong yen has made their goods more expensive overseas.

Bank of America-Merrill Lynch said: "Given the lack of clarity over the pricing of this deal, one can expect the stock price to be volatile.

"And while we can see the stock pop on the back of belief for a re-pricing, any gain here could evaporate if the latter belief is negated.".

-- Dow Jones Newswires contributed to this report --

Explore further: Why the Sony hack isn't big news in Japan

add to favorites email to friend print save as pdf

Related Stories

Hon Hai to hike salaries for Taiwan staff

Apr 05, 2012

Taiwan technology giant Hon Hai, which makes gadgets for Apple, said Thursday it would hike salaries for its Taiwan staff as prices on the island soar.

Japan Inc. faces 'tectonic changes': analysts

Apr 02, 2012

Sharp's announcement that it will team up with Taiwan's Hon Hai Precision on a liquid-crystal display deal is the latest example of the "tectonic changes" rippling through hard-hit Japan Inc.

Taiwan's Hon Hai looks to robot industry

Oct 31, 2011

The parent company of Taiwanese tech giant Foxconn plans to mass produce industrial robots as part of its efforts to cope with labour shortages and rising wages.

Foxconn building Shanghai HQ, aims at China market

May 10, 2012

(AP) -- Foxconn Technology Group, the world's biggest assembler of consumer electronics, began work Thursday on a Shanghai headquarters that it says will help spearhead its efforts to sell more in the China market.

Recommended for you

Why the Sony hack isn't big news in Japan

17 hours ago

Japan's biggest newspaper, Yomiuri Shimbun, featured a story about Sony Corp. on its website Friday. It wasn't about hacking. It was about the company's struggling tablet business.

Sony faces 4th ex-employee lawsuit over hack

22 hours ago

A former director of technology for Sony Pictures Entertainment has sued the company over the data breach that resulted in the online posting of his private financial and personal information.

Sony tells AFP it still plans movie release

23 hours ago

Sony Pictures boss Michael Lynton denied Friday the Hollywood studio has "caved" by canceling the release of "The Interview," and said it still hoped to release the controversial film.

2012 movie massacre hung over 'Interview' decision

Dec 19, 2014

When a group claiming credit for the hacking of Sony Pictures Entertainment threated violence against theaters showing "The Interview" earlier this week, the fate of the movie's big-screen life was all but ...

Clooney slams skittish Hollywood after Sony hack

Dec 19, 2014

Film star George Clooney slammed the Hollywood movie industry for failing to stand up against the cyber threats that prompted Sony Pictures to cancel release of the movie "The Interview."

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.