When the soon-to-be Sony President and CEO, Kaz Hirai, announced his ‘One Sony’ strategy which included three pillars of focus, Sony’s television business was most notably missing. In his announcement, Kaz specifically outlined that he would begin to personally oversee the troubled division and make strategic decisions accordingly. Now, we’ve come to learn that Sony’s LCD partner, Sharp, who’s been in deep financial trouble themselves and had to sell off some its shared LCD business with Sony to Taiwan’s Hon Hai Group, is continuing their financial downward spiral. Due Sharps inability and Sony’s recent reassessment of LCD manufacturing which had them sell off their stakes of S-LCD manufacturing to Samsung, Sony has decided to halt all financial injections into the partnership which produced large panel LCDs. Sony is giving the partnership until the end of September to “to permit study of the future direction of the joint venture.”

At any time, even before the agreed-upon September date, Sony is allowed to require Sharp to buy out all remaining Sony shares in the SDP (Sharp Display Products Corporation). On December 29, 2009, Sony invested 10 billion yen into SDP in exchange for new shares issued by SDP to Sony and as a result, SDP became a joint venture company of Sharp and Sony. The future for Sharp at this point seems abysmal so its good to see Sony exercising their option to withdraw from the partnership where in years past, they might have continued to fund the losing deal due to respect and commitment.

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Sharp and Sony Amend Agreement regarding Joint Venture to Produce and Sell Large-Sized LCD Panels and Modules

Sharp Corporation (“Sharp”) and Sony Corporation (“Sony”) announced that they have agreed to further amend the joint venture agreement originally executed by the parties in July 2009, as amended in April 2011, for the establishment and operation of Sharp Display Products Corporation (“SDP”), a joint venture to produce and sell large-sized LCD panels and modules.

Pursuant to the April 2011 amendment, Sharp and Sony discussed possible further contributions by Sony to SDP, but they have agreed that Sony will not make additional capital injections to SDP. The parties have also agreed to set a new time period, up to the end of September 2012, to permit study of the future direction of the joint venture, including with respect to the treatment of the shares that Sony has in SDP (7.04% of all issued shares) and possible purchases of large-sized LCD panels and modules. Under the March 2012 amendment, Sony may require that Sharp acquire all of Sony’s shares in SDP, even before the end of September 2012, upon the occurrence of certain events such as a transfer by Sharp to any third party of some or all of the shares that Sharp has in SDP.

On July 1, 2009, Sharp transferred its LCD panel plant in Sakai City, Osaka Prefecture, to SDP. On December 29, 2009, Sony invested 10 billion yen into SDP in exchange for new shares issued by SDP to Sony (representing 7.04% of the issued shares in SDP) and, as a result, SDP became a joint venture company of Sharp and Sony. Since then, Sharp and Sony have continued discussion about possible further contributions by Sony to SDP.

[Impact on the consolidated financial information of Sharp, as a parent company of SDP]
No material impact from this amendment is anticipated on Sharp’s consolidated financial results for the fiscal year ending March 31, 2012.

[Impact on the consolidated financial information of Sony]
No impact from this amendment is anticipated on Sony’s consolidated financial forecasts for the fiscal year ending March 31, 2012.

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Discuss:

Should Sony leave the LCD manufacturing business all together? Remember, that’s different than TV production.