The reason was interesting. No doubt looking to impress the financial community, Toshiba set aggressive budgets. But the only way its staff could meet those budgets was through the use of ‘creative accounting’.
If that wasn’t enough, it then got itself embroiled in another financial disaster when it acquired a US based nuclear power business for what appeared to be a bargain price of $229million. Once a closer look was taken at the books, it realised the acquisition would actually cost several billion dollars.
That took Toshiba to the brink of bankruptcy. It started to restructure its business, including setting up a new operation to handle its semiconductor interests. It also sold fabs and, at the start of 2016, a rumour surfaced that Toshiba was shopping its memory business around – what could, in some respects, be seen as its ‘crown jewels’. Toshiba did what all good companies do in such circumstances and denied it vehemently.
But the wisps of smoke turned to fire. Toshiba has sold its memory business for $18bn to a consortium led by US invesment company Bain Capital, apparently including the likes of Dell, Apple and Hynix.
Deal such as these are always interesting, once you get to see some of the smaller print. For example, as part of the agreement, Toshiba will invest $3bn in the new company. Doubtless, Bain Capital will load some of the purchase price on to the new company’s balance sheet in the form of debt – the same thing happened when private equity acquired Freescale and NXP.
Looming over the deal, however, is the shadow of Western Digital. Let’s just say the memory company isn’t happy; it’s pursuing various legal options to block Toshiba’s memory business being sold to anyone. It may well be the deal will collapse.
All of which brings us to the topic of Toshiba’s board and the question ‘what were they thinking?’.
