In Play: Sharp Electronics is Running out of Options

News has emerged that Japanese electronics giant Sharp is making a move. They are looking, at least considering the option, to spin off their LCD panel making division. This has supported investor interest in the stock but many analysts, including myself, are not sure it is enough to calm our overall outlook over the embattled electronics company.

Reuters has reported that an article in Nikkei Business Daily, that the Sharp Corporation, which is nearly one hundred years old, is seeking help from Innovation Network Corporate of Japan (INCJ) to help spin off its mid-sized LCD business this year. The INCJ, which is backed by Japan’s government, is considering investing ¥100 billion in the new company. This unit supplies smartphone and tablet manufactures with displays.

A spokesperson from Sharp has only confirmed that are looking into reforms for the division and not concrete decision has been made yet.

Yesterday, after the news, shares of the company, which are listed on the Nikkei shot up 2.5 percent which extended that six percent rally from the day before. Currently, at the time of this report, the stock is virtually flat as it is trading 0.6 percent lower.

Investors are Happy but Analysts not so Much

This move does not make the company that attractive going forward. All they are doing is shedding their LCD making division. After this sale the company will not be left with much. They have not invested a great deal of money into research and development (R&D) because they have been strapped for cash. Their LCD unit is about one third of the tech giant’s total sales and they have been faltering thanks to stiff competition from regional rivals like Japan Display, Inc.

Right now Sharp is on course for its third annual net loss in four years. They are getting ready to announce a broad restructuring plan as they need a bailout from Mizuhu Bank and the Tokyo-Mitsubishi UFJ Bank. There is also Foxconn, based in Taiwan,  which is looking to invest money into the ailing electronics manufacturer.

Sharp Electronics is simply carrying too much debt to make this move significant and they are running out of options to save themselves. The aid from Foxxcon has yet to materialize. Sharp has been limping along as they are hoping that smaller-sized LCDs rescue them. There is mounting pressure here as prices are falling.

While a step in the right direction, this sell-off is not enough.