11/22/2015 Losses in PC and components business part of Toshiba cover up | Tech Channel MEA http://techchannelmea.com/technologyannouncements/lossespcandcomponentsbusinessparttoshibacover 1/7 TCM Search Search Losses in PC and components business part of Toshiba cover up Source: Arun Shankar Publish date: 25 Jul 2015 Print Email On 21 July, Toshiba Corporation made public the investigation report on the alleged financial irregularities from the Independent Investigation Committee. The company announced that it will analyse and examine the investigation results and recommendations received from the Independent Investigation Committee, and reflect them in the management practices, as well as examine measures to prevent recurrences. The Independent Investigation Committee pointed out the need to look at evaluation of assets and book impairment of fixed assets including the timing of impairment in the PC business, Visual Products business, and the Discrete and System LSI business in the Semiconductor business, and the need to book a valuation allowance regarding longterm deferred tax assets of the Company and its consolidated subsidiary corporations. The Company will take necessary procedures for the current financial reports based on the examination of the accounting procedures for the past financial years including the above mentioned matters, the report by the Independent Investigation Committee and the results of selfchecks by the Company, and finalize the amount of impact on past consolidated and non Top management of Toshiba at the recent July announcement. Losses suffered in PC, components, and digital business were part of the management cover up from 2008 to 2014. Home / Technology / Announcements Articles Pictures Videos Emirates airline, Dnata to enhance business with big data analytics Mubadala, GE finalise deal for joint venture in Al Ain Mahindra Comviva to extend footprint across MENA region Canon enters partnership with Cerebra Middle East Microsoft, Pacific Controls announce software platform Galaxy 2021 Read more.. Most Recent By Cisco's calculations there is shortage of 1 million security experts globally. Anthony Perridge, Security Sales Director, Cisco We have a distinct point of view here, we have no legacy architecture to protect. Michael Dell, Chairman of the Board of Directors and CEO of Dell The biggest innovation was managing growth and that is still name of the game in GCC. Wael El Kabbany, VP MENA, BT Global Services The specific partner needs to be able to have a discussion with business. Amir Sohrabi, GM Gulf Emerging Markets, SAS Middle East Read more.. Briefly Spoken Home Sign In Register TECHNOLOGY CHANNEL PARTNER PROGRAMMES NEW PRODUCTS EVENTS PEOPLE EXPERT TALK CONVERGENCE CLOUD SECURITY STORAGE MOBILITY RESEARCH & SURVEYS
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11/22/2015 Losses in PC and components business part of Toshiba cover up | Tech Channel MEA
Losses in PC and components business part of Toshiba coverup
Source: Arun Shankar
Publish date: 25 Jul 2015 Print Email
On 21 July, Toshiba Corporation made public the investigation report on the alleged financialirregularities from the Independent Investigation Committee. The company announced that itwill analyse and examine the investigation results and recommendations received from theIndependent Investigation Committee, and reflect them in the management practices, as well asexamine measures to prevent recurrences.
The Independent Investigation Committee pointed out the need to look at evaluation of assetsand book impairment of fixed assets including the timing of impairment in the PC business,Visual Products business, and the Discrete and System LSI business in the Semiconductorbusiness, and the need to book a valuation allowance regarding longterm deferred tax assets ofthe Company and its consolidated subsidiary corporations.
The Company will take necessary procedures for the current financial reports based on theexamination of the accounting procedures for the past financial years including the abovementioned matters, the report by the Independent Investigation Committee and the results ofselfchecks by the Company, and finalize the amount of impact on past consolidated and non
Top management of Toshiba at the recent July announcement.
Losses suffered in PC, components, and digital business were part of the managementcover up from 2008 to 2014.
Home / Technology / Announcements
Articles Pictures Videos
Emirates airline, Dnata to enhance businesswith big data analytics
Mubadala, GE finalise deal for joint venture inAl Ain
Mahindra Comviva to extend footprint acrossMENA region
consolidated financial results, and will submit by 31 August. In addition, the Company willpromptly make announcements in relation to correction of past fiscal year results and theconsolidated forecast for the fiscal 2014 once these are finalized. Post the acceptance of theIndependent Investigation Committee report on 21 July, a significant number of top managementexecutives also retired and were replaced.
In summary, successive top managements at Toshiba devised accounting procedures to coveradditive and mounting losses triggered first by the global financial meltdown of 2008 and 2009,then by the economic disaster of the Japanese Tsunami of 2012, and running parallel thedisruptive end of the PC and older digital life cycle triggered partly by the Third Platform oftechnologies, namely mobility, cloud, social and analytics. The findings of the IndependentInvestigation Committee made public on 21 July point to under reporting of losses by successivemanagements of the order of ¥151.8 trillion, $1.23 billion, from 2008 to 2014, partly across thelifestyle products and services business and electronic devices and components business. Thefinancial year ending 2012 carries the largest irregularity of ¥85.8 trillion, $0.69 billion.
The initial whistle blower of January 2015, Seiya Shimaoka an internal auditor at Toshiba, firstdrew attention to the corporate accounting irregularities by asking external auditors to relook atthe accounting records of the PC business. As far back as 2008, Atsutoshi Nishidia, Presidentand CEO of Toshiba at the time, refused to publish the losses as they had started accumulatingand converted them into a profit statement, according to the findings of the IndependentInvestigation Committee, and reported by Financial Times.
The reasons for the business losses in the electronic devices and components and lifestyleproducts and services business, can be appreciated by the overall sales model and operatingincome margins. Toshiba’s is a story of slender margins, strong demands for technologyinnovation, and rapidly changing cycles of business and consumer appetite.
Toshiba’s global business today consists of the five divisions including energy andinfrastructure, community solutions, health care systems and services, electronic devices andcomponents, lifestyle products and services. The two ICT driven segments including electronicdevices and components and lifestyle products and services, once contributed 53% of total salesin 2003, with a peak of 57% in 2006, declining to 42% in 2014.
Toshiba’s global business has been close to a flat CAGR growth of 1.6% from 2003 to 2014,growing from ¥5.44 trillion to ¥6.50 trillion, or $52.5 billion in 2014 at current exchange rates.Its operating income, that is net sales less cost of sales, has been at a better CAGR of close to 9%from 2003 to 2014, growing from ¥0.12 trillion in 2003 to ¥0.29 trillion in 2014. But theoperating income margin for the global manufacturer has been slender, increasing from 2.1% in2004 to 4.5% in 2014. The overall slender operating income margin for the global business hasmeant that its business divisions themselves have swung marginally between profit and loss overthe years.
Toshiba’s global business has been growing from ¥5.44 trillion to ¥6.50 trillion from 2003 to 2014. Its operatingincome, that is net sales less cost of sales, has been growing from ¥0.12 trillion in 2003 to ¥0.29 trillion in 2014.Source: Toshiba Annual Reports
The two divisions that are driven by the ICT industry and ICT technologies including thelifestyle products and services business and electronic devices and components business, haveshown varying degrees of financial and business success.
The electronic devices and components business including flash memory, HDD, storage andcomponents has been consistent in its contribution to the overall sales. It used to contribute closeto 20% of overall sales in 2003 and now contributes close to 24% in 2014. Its operating incomemargin has increased significantly from 2.5% in 2003 to 14.1% in 2014. Its sales CAGR hasbeen impressive at 20% from 2003 to 2014.
The lifestyle products and services business consisting of PCs, visual products, and homeappliances used to contribute close to 33% of overall sales in 2003 and now contributes close to19% of overall sales. Its operating income margin has shrunk significantly from 1% in 2003 toloss making margin of negative 4% in 2014. Its sales CAGR has been negative from 2003 to2014.
Prior to 2014 and as far back as 2007, the lifestyle products and services business, was called thedigital products business and consisted of mobile communications, digital media networks andpersonal computers and networks. Similarly in 2007, the electronic devices and componentsbusiness consisted of semiconductors, display devices and components control.
The operating income margin for the electronic devices and components business has increased significantly from2.5% in 2003 to 14.1% in 2014. Its sales CAGR has been impressive at 20% from 2003 to 2014. The operatingincome margin for the lifestyle products and services business has shrunk significantly from 1% in 2003 to lossmaking margin of negative 4% in 2014. Its sales CAGR has been negative from 2003 to 2014. Source: ToshibaAnnual Reports
At multiple IT forums, global research companies IDC and Gartner have pointed to theincreasing disruptive challenges likely to be faced by traditional PC vendor companies. “Incomparison to the last 4050 years, the changes in IT spending today are being influenced byconsumerism, which moves at a much faster pace than business investment cycles. Anycustomer facing services and products are more likely to see accelerated changes,” commentedPeter Sondergaard, Senior Vice President and Global Head of Research Gartner, as far back as2013, at the Gartner CIO Symposium in UAE. “However during the interim period, you arenever going to see a large technology provider suddenly drop off the cliff. And some willstruggle and others will thrive”
“2014 will see the emergence of two IT markets. One of the IT markets is aligned to what iscalled the second platform of opportunity of traditional industry, which is stagnating and quiteoften declining. And the other is aligned to the third platform industry where there is substantialgrowth. The third platform will cannibalise the growth of the second platform in 2014 andbeyond. Spending and value will rapidly shift away from traditional product and servicecategories into third platform technologies, services and solutions. Third platform technologiesand solutions will dominate growth in 2014, and beyond,” mentioned Steven Frantzen, SeniorVice President EMEA, IDC, during IDC’s Direction 2014 briefing.
Toshiba is trying to bring back profitability in 2015 by focussing on three key areas – datastorage, healthcare and energy. It is attempting to revive innovation by an internal programmecalled Project Gain, which is an out of the box approach to review productivity processes.
Toshiba’s electronic devices and components business today includes flash servers and storage,hard disk drives, NAND flash, floating gate technology, discrete and system LSI, 3D memoryproduction. Production requirements for the Internet of Things including wearables and smartdevices will be part of this business segment in the future. The division will also look at therequirements of the enterprise. Recent innovations include 19 nm process technology for the 64gigabit NAND flash memory in collaboration with Sandisk, hybrid storage array for cloud
platforms, and development of 5 TB HDD. The sales of this division is expected to grow from¥1.69 trillion in 2014 to ¥2.2 trillion in 2016, as mentioned in the 2014 Annual Report, with yearending 31 March.
In June 2015, Toshiba and Microsoft announced the two companies have signed a Memorandumof Understanding to jointly develop solutions for the Internet of Things. Leveraging Toshiba’sIoT devices with Microsoft’s Azure IoT Cloud infrastructure, Toshiba will deliver sensordatadriven applications in various market segments starting in calendar year 2015. In thispartnership, Toshiba will provide X as a Service Xaas making use of its inhouse technologiessuch as ApP LiteTM, invehicle driving recorders, sensors and cloud storage services andMicrosoft will provide IaaS, private line services and advanced analytics as part of MicrosoftAzure.
Toshiba and Microsoft announced they will offer IoT enterprise solutions, starting with thetransportation and logistics market in calendar year 2015, by delivering IoT devices and XaaS,utilising scalable, costeffective services and technologies combined with better user experience.
Toshiba’s global business today consists of the five divisions including energy and infrastructure, communitysolutions, health care systems and services, electronic devices and components, lifestyle products and services.The two ICT driven segments including electronic devices and components and lifestyle products and servicesonce contributed 53% of total sales in 2003, and in 2014 the contribution declined to 42%. Source: Toshiba AnnualReports
Toshiba’s lifestyle product and services business today includes home appliances, visualproducts and PCs. The company plans to increase the profitability of the division by focussingon the business and enterprise segment, security and HDD solutions, and IoT solutions. Recentinnovations include Cinema 4K image quality, Android OS LCD TV, Toshiba Smart ClientManager, Dynabook Kira with WQHD LCD touch panel, and the Toshiba Direct onlineshopping site. The sales of this division is expected to grow from ¥1.31 trillion in 2014 to ¥1.4trillion in 2016, as mentioned in the 2014 Annual Report, with year ending 31 March.
Earlier in the year, Toshiba and its subsidiary, Toshiba Lifestyle Products and Services Corp,announced they will undertake a restructuring of Toshiba’s Visual Products business by ceasingTV development and sales operations in North America and licensing the North American TVbusiness to Taiwan’s Compal Electronics. Toshiba also announced its intention to transform itsconsumer TV business in regions other than Japan, replacing own development and sales with abrand licensing structure.
However Toshiba still faces the challenge of rebuilding a culture of internal innovation andcreativity that is competitive against the fast changing external disruptive environment, in whichit was once a front runner ten years ago.