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Fully Charged From Bloomberg ... Fear and loathing in Tokyo
Hi, Reed here. Most of the time, Toshiba is invisible. It's a conglomerate that makes many of the memory chips in smartphones, and may even have built the nuclear reactor feeding electricity into your house. Toshiba usually isn't on anyone’s radar, but it's a rollicking story here in Japan.
Yes, it is.
'This is very, very annoying,' a reporter for the Nikkei newspaper said to Toshiba President Satoshi Tsunakawa at the start of news conference, after the company disclosed a $6.3 billion writedown in its nuclear operations. Asperities aside, his anger was fueled by a chaotic day of earnings on Tuesday. It started with the company promising to disclose figures. Then it missed its deadline, announced a delay of one month, only to toss out provisional numbers anyway. When there's bad news to deliver, it's usually not a good idea to mess up the actual announcement.
Shareholders were probably angrier. Toshiba's stock dropped 9 percent, then another 8 percent the next day. All told, $9 billion in market value has been wiped out since the company first warned in December of a looming loss.
Another reason for the fury: this isn't the first time. In 2015, Toshiba got caught in a profit-padding scandal, which claimed the jobs of three presidents, led to record losses and a round of asset sales. Sitting on the subway, it's hard to miss newspaper and magazine headlines bemoaning Toshiba's corporate governance and massive losses.
You can't blame reporters and the public for being so indignant. While I edit technology stories in Tokyo, I've also observed Japan Inc. on and off since the burst of the asset bubble in the 90s; I get the feeling that the anger runs much deeper. Toshiba is just the latest symptom of a longer-term slide in Japanese innovation and competitiveness, usually by way of scandal. Consider Olympus's loss-hiding scandal in 2011, or security fraud at Livedoor, or a litany of other imbroglios involving everything from stock brokers (Yamaichi Securities) and utilities (Tepco), to carmakers (Mitsubishi Motors) and cosmetics (Kanebo).
'Toshiba is one example of an established pattern,' said Zuhair Khan, an analyst at Jefferies in Tokyo. 'On a societal level they are not reinvesting, they are not spending money on R&D and capex in the way that they should. Without that you're not going to create the higher-paying jobs.'
For now, Toshiba will be able to dig itself out. The company floated the idea of selling a majority or even all of its memory chip business. That could fetch as much as $14 billion and is a good bet, given that people keep buying smartphones and computers and servers are switching to flash-based memory instead of spinning hard drives.
Toshiba may not survive in its current form, but the company can continue making refrigerators and elevators and keep people employed. It's a comedown for an enterprise that was founded in 1875 and made Japan's first light bulb. And it's not an exaggeration to say that Toshiba created the blueprint for Sony, Panasonic and other electronics makers that came later. It's hard to imagine Samsung's success without the business model that Toshiba pioneered.
There's still plenty of innovation left in Japan, in areas such as robotics and medical technology. And there are pockets of manufacturing prowess and craftsmanship that factories elsewhere struggle to match.
But as long as that gap persists between potential (plus past glory) and the steady eruption of corporate fiascos, you can count on another angry reporter shouting at contrite corporate executives, bowing in shame not just to shareholders, but the country as a whole
Open external link ... History of Toshiba
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