A Look at Sharp’s Earnings’ Recovery Since Foxconn Acquisition

Sharp’s North American headquarters in New Jersey.

In 2016, giant electronics contractor Foxconn – also known as Hon Hai Precision Industry  and headquarted in Taiwan – acquired struggling electronics maker Sharp Corporation of Japan for $3.5 billion in an unusual development, as Japan had long resisted foreign takeovers of its companies. Since then, Sharp’s earnings have recovered as seen in the chart below.

Chart for Doing Business in Kansai and Osaka report

(Sharp’s earnings’ recovery under Foxconn. Visit this link to see an interactive chart that indicates net sales, operating profit, and more for this time period.)

Since its acquisition by Foxconn, a lot has happened at Sharp. Last December, it returned to the Consumer Electronics Show for the first time in years, where it showcased its 8K, AIoT, home, robotic, and business technology. This May, Sharp announced it was re-entering the U.S. TV business, setting up a new partnership with  Hisense International (Hong Kong) America Investment Company.

In the copier/MFP market, Sharp made waves in December 2018 with its introduction of the first voice-driven copier/MFPs. More recently, this spring, market-research firm International Data Corporation (IDC) released new research indicating that Sharp achieved the highest growth rate of any office-equipment vendor in 2018, selling 16 percent more copier/MFPs in  2018 compared to 2017.

But perhaps the biggest surprise at Sharp – which quit the PC business in 2010 – came in June 2018, when it announced it was getting back in the PC business with the purchase of 80.1 percent of Toshiba PCs business for $36 million (see here for more).

The official line from Foxconn is that “Sharp is a stronger company today than it was three years ago.” Foxconn notes that before its acquisition, Sharp reported an annual net loss of $2.4 billion, but  has now been profitable for 10 consecutive quarters.

During that time, Foxconn has implemented some cost-saving measures – Sharp moved its North Americans headquarters in New Jersey to a smaller location for instance.  According to the Financial Times, one big win for Sharp has been its ability to save on  procurement and production costs by joining up with Foxconn, as Foxconn is the world’s largest contract manufacturer of electronics and the main supplier for Apple’s iPhones.

“Sharp has become an entirely different company. There is now financial discipline to generate profits,” said Masahiro Ono, an analyst at Morgan Stanley MUFG Securities.

Sharp is also said to have moved some production to China to save costs and is using cheaper local suppliers.

However, the U.S.-China trade war, as well as weaker performance by Foxconn, are said to have affected Sharp more recently, with Sharp shares dropping to below ¥1,000 from a high of ¥5,040 in April 2017. One Sharp weakness may be consumer electronics, as about a quarter of Sharp’s sales are said to be dependent on Apple, and Apple’s iPhones have been suffering from lower demand.

Sharp has consequently warned that it will “probably fall short of its 2019-20 operating profit target, set two years ago, by 33 percent,” according to the Financial Times.

Meanwhile, for its fiscal year that ended on March 31, 2019, Sharp reported that total sales were down 1.6 percent year-over-year, while sales for its Smart Business Solutions group – copier/MFPs and other office equipment – were virtually flat at 0.7 percent year-over-year. Total profits for the year, however, were up 5.7 percent year-over-year.

Sharp will release results for its first quarter that on ended on June 30th on August 1st, so stay tuned.

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