Worse than expected financials may prompt Toshiba to sell majority stake in chip business

We've written a couple of times over the last couple of weeks about how Toshiba is looking to sell a stake in its profitable semiconductor business to offset losses in its nuclear division. Things took a turn for the worst as Toshiba's financial woes are much greater than expected.

The Japanese conglomerate revealed on Tuesday that it will need to write down $6.3 billion of the value of its nuclear business, a move that will wipe out the shareholder's equity on the company's balance sheet. At the same time, Toshiba unexpectedly delayed the publication of its earnings report, said it would stop making nuclear power plants altogether, and saw the resignation of its chairman.

Toshiba previously planned to sell a minority stake of around 20 percent in its semiconductor business, which includes its prized flash unit, but more aggressive asset sales will be needed now to avert disaster. In particular, it seems Toshiba will be forced to sell a majority stake in its chip business as the company needs the cash to avoid bankruptcy.

The sale of a majority stake in the flash unit will save Toshiba's balance sheet but analysts are worried this turnaround plan will give no hope for Toshiba's future as the company will be deprived of its best assets, and will be left with non-performing units.

Facing a March 27 deadline to avoid a delisting, Chief Executive Satoshi Tsunakawa said he would consider selling most, even all, of the chips business - a turnaround from the conglomerate's previous stance that it would sell only about 20 percent.

The change of direction has prompted investors to question whether the company would have a long-term future without control of the unit and could well shake up the bevy of suitors interested in a piece of the world's biggest NAND chip producer after Samsung Electronics Co Ltd (005930.KS).

Further details about Toshiba's woes can be read at Reuters.