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Samsung confirms Toshiba is trying to sell DRAM biz

Sale one way to pay for 17,000 job cuts

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Toshiba must undergo a "drastic restructuring" the company's president, Tadashi Okamura, warned on Monday as the company announced it would sack around 17,000 of its staff - 12 per cent of the workforce - around the world, although the bulk of the cuts will be made in Japan.

Part of the programme involves the amputation of the company's memory business. Yesterday, Okamura raised the possibility of an Infineon-style spin off plan. During the day, Infineon itself said the two companies were discussing possible avenues of co-operation. Today, Samsung claimed it had been offered Toshiba's chip business for sale.

At the root of Toshiba's problems is the worldwide slump in chip sales. Some observers expect them to recover during the remaining months of 2001, but Toshiba takes a different view: it "won't recover in a short time", said Okamura . "We expect that it will take until 2003 for the IT industry to complete all necessary reorganisation."

"We expected that economy will start to recover in the second half, but now we can not expect it because of the drastic economic slowdown in the US started late last year and in the other parts of the world," he added. "We cannot expect the recovery in the second half as well."

You can understand the company's gloom. As a result of the downturn, Toshiba now expects to record a loss of ¥80 billion ($667 million) on sales of ¥2650 billion ($22 billion) for the first half of the year. Previously it had anticipated make a profit.

For the year as a whole, it will just break even (it originally expected earnings of ¥200 billion) on sales of ¥5750 billion (down from its previous forecast of ¥6440 billion).

Toshiba reckons its electronic device and component division will lose ¥120 billion for the full fiscal year. Semiconductors will lose ¥94 billion and discrete components will be down ¥26 billion.

The restructuring charge is expected to total ¥120 billion. A cost reduction programme and a business review is expected to yield some savings, however.

So too will the sale of its memory business. On Monday, the company wouldn't comment on claims that it was talking to Samsung and Infineon, stressing it doesn't want to name names. Infineon, however, went on record to say the two companies were discussing ways they could co-operate over DRAM production.

And this morning, a Samsung spokesman told Reuters "we have recently received the takeover offer from Toshiba [and] as far as I know, Toshiba is contacting several ranking DRAM makers around the globe".

Toshiba had already said it planned to shut at least one memory plant, temporarily, to help limit the deluge of memory parts that has driven prices so low, but clearly the company feels that is too little, too late. Worse, it's unitlateral. Any serious attempt to limit production must be conducted with the co-operation of other manufacturers. Taiwan's memory makers have agreed production limits, but together they account for only 15 per cent of memory sales. Few of the large players seem willing to make cuts unless they're forced too. Calls from some memory companies, believed to include Micron and Infineon, have failed to come to anything.

Indeed, the mood seems too predatory for co-operation. You can almost sense the stronger players sitting tight, waiting for weaker rivals to collapse. Debt-laden Hynix was expected to be the first.

Only the largest players, like Infineon and Samsung, can afford to buy Toshiba's memory business, but even they may decide it's too expensive, given the company controls less then ten per cent of the market. ®

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