TOKYO – (AP) – Contested Japanese tech company Toshiba said Friday that it is restructuring to improve its competitiveness and is spinning off its energy infrastructure and computing device businesses.
The spin-off of the energy infrastructure includes the nuclear power operations of Toshiba Corp.
The energy business will also include the company’s sustainable energy and battery businesses. Annual sales are approximately 2 trillion yen ($ 18 billion).
The other spin-off and stand-alone company includes Toshiba’s computing devices and storage operations with annual sales of 870 billion yen ($ 7.6 billion).
Toshiba will remain a third independent company holding the remaining companies, such as its flash memory company Kioxia Holdings Corp. and Toshiba Tec Corp., which manufactures office equipment.
Such a large restructuring is unusual for a large Japanese company. But Toshiba is not alone in deciding that a sprawling conglomerate may not be the best for the time being.
Earlier this week, General Electric announced it was splitting into three publicly traded companies focused on aerospace, healthcare and energy. Like Toshiba, GE struggled under its own weight and after a lengthy review decided to streamline its core business.
Toshiba said its restructuring would be completed by March 2024. The separation of the company’s financial results will begin this fiscal year, it said.
Chief Executive Satoshi Tsunakawa said the two types of companies being spun off are very different, with the equipment business cycle being much faster than that for the infrastructure and equipment business requiring heavy investments.
“It will unleash immense value by reducing complexity, it will allow companies to be managed much more focused, facilitate agile decision-making, and the separation will of course improve shareholder choice,” said Tsunakawa of the new structure.
The move still requires the approval of the shareholders. A shareholders’ meeting will be held early next year, said Tsunakawa.
In a statement to shareholders, Toshiba said its “bold and ambitious plan” followed a five-month review by the board’s strategy committee.
The line-up and names of the spin-offs will be announced later, according to Toshiba. Adjustments in the company and workforce are still undecided, it said.
Toshiba issued a statement on Friday promising to improve its corporate governance. An investigation by a governance group found no illegality, but some managers engaged in dubious practices related to blocking the views of some shareholders.
Toshiba has had regular governance issues, including a 2015 scandal over accounting books that have been forged for years to inflate revenue.
Since then, the company has cut thousands of jobs and sold parts of its sprawling business.
Also on Friday, Toshiba reported profits of 41.8 billion yen ($ 367 million) for July-September, more than double the profit of 14.8 billion yen a year earlier.
Officials said the better results reflect restructuring efforts and improved sales. Quarterly sales increased 6% year over year to 818.5 billion yen (7.2 billion US dollars).
Forecasting earnings of 130 billion yen ($ 1.1 billion) for the fiscal year ended March 2022, Toshiba increased its previous forecast by 20 billion yen ($ 175 million) and increased profit from 114 billion yen in the previous year.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
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