Reshuffle at Sharp blunts expectation for change

An expected $3.5 billion record net loss as TV sales slumped is raising a red flag with investors worried that Sharp has fumbled its business strategy. Takashi Okuda's appointment as its new boss suggests it is not about to flinch and abandon making TVs. Okuda 58, who replaces Mikio Katayama as president on April 1, is a 30-year veteran. Much of his career has been spent in Sharps' TV business and in trying to expand sales to consumers overseas.
At a press briefing on March 14 to announce the management changes, he pledged to revamp Sharp's operations while "emulating" the course steered by Katayama.
Katayama, who has run Sharp for five years and will remain influential as chairman, described his coming relationship with Okuda as a "three legged" race, suggesting the two will move in unison.
For that reason analysts expect Okuda to make few major changes and for the company to stick to a model of making its own TVs and selling surplus liquid crystal panels to third parties. "Sharp shouldn't panic," said Shiro Mikoshiba, an analyst for Nomura Holdings. "I don't think Katayama's strategy was wrong."
In February, Sharp forecast a record 290 billion yen loss for the year to the end of March. A slump in TV sales forced it to halve output at an LCD plant in western Japan, raising questions about its business model. Analysts agree on the problem at Sharp; it has two expensive LCD plants that are not being utilised enough because Sharp isn't selling enough of its Aquos-branded TVs either at home or overseas or is not finding customers to buy up enough of its surplus liquid crystal panels.
In the three months to December 31, that forced the company to write off 33 billion yen of inventory. Its newest plant in Sakai, western Japan, built at a cost of more than $4 billion was operating at only 50 percent of capacity during the quarter.
However, big TVs are selling well in the United States, which Sharp should exploit. "They don't have the competitive edge to focus only on components," Mikoshiba said. "Instead they can pour their efforts into 60-inch TVs and develop that market. Sharp has a unique model where it is its own customer, where it supplies itself with panels to make TVs, so it's a strategy that they can follow. In the long term I think it's the only path that Sharp can follow."
Katayama suggested that the company's business strategy is right, despite the losses that are piling up.