Toshiba's second straight quarterly loss, which prompted a $5 billion fund-raising, may signal the worst is over for the debt-laden electronics conglomerate, as it forecast a return to profit this year.
Japan's biggest chipmaker is shifting focus to its relatively stable power business and other promising areas such as lithium ion batteries, while shrinking investments in its loss-making chip business to cut costs and improve earnings.
Chipmakers have been hit by sharp declines in demand and prices which have led some to seek bankruptcy protection and others to look for partners. Almost all are losing money.
Toshiba has said it hopes to lead an industry reorganisation in Japan to revive its system and discrete chip businesses.
But it faces hurdles as domestic rivals NEC Electronics and Fujitsu have chosen other partners.
NEC Electronics is discussing a merger with Renesas Technology, while Fujitsu has decided to outsource its output to TSMC and said it may work together on the development of next-generation chips with the Taiwanese contract chipmaker.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said it would be difficult for Toshiba to invest the new funds in ways that would boost its competitiveness.
"In other times, the correct response might have been to invest in chips, and try to squeeze out the competition, but right now, the outlook is too hazy," he said.
Toshiba forecast a return to an operating profit this financial year as it pushes ahead with a previously announced $3 billion cost-cutting plan. It expects its chip business to remain in the red this year.
Toshiba had been widely expected to raise capital to counter the impact of a big loss in the last financial year as it tore into a balance sheet already battered by 1.8 trillion yen in interest-bearing debt.
Shares in Toshiba, whose products range from PCs, TVs and refrigerators to nuclear power plants, have slid 1.4 per cent in 2009, underperforming a 26 percent rise in the electrical machinery subindex.
Toshiba said it would raise as much as 493 billion yen in capital, including new shares worth up to 313.1 billion yen. It will raise the rest through an issue of subordinated bonds.
Reuters