Reuters: Global Markets: Sharp shares tumble after deep first-quarter loss, forecast cut

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Sharp shares tumble after deep first-quarter loss, forecast cut Aug 3rd 2012, 01:27 TOKYO | Thu Aug 2, 2012 9:27pm EDT TOKYO (Reuters) - Shares of Sharp Corp (6753.T) fell nearly 30 percent on Friday, a day after the Japanese consumer electronics firm reported a deeper-than-expected quarterly operating loss, lowered its annual forecast and announced its first job cuts in decades. Struggling with waning TV demand and competition from rivals led by Samsung Electronics Co (005930.KS), Sharp said it would cut about 5,000 people - about one-tenth of its workforce - for its first redundancies in more than 60 years. The maker of the Aquos TV brand posted on Thursday a 94 billion yen operating loss for the April-June quarter, much deeper than the 44.4 billion yen shortfall that had been expected by analysts, leading to concerns over its capital. "With Sharp's losses growing to this level, there's barely going to any net capital left," said Makoto Kikuchi, CEO of Myojo Asset Management in Tokyo. "They'll get support from the banks and get through their immediate funding concerns... but they're going to have to do some equity financing to strengthen their capital base." Underlining a looming cash crunch, Sharp's credit default swap spreads - the cost of insuring its debt against default - have been widening since February, with the 5-year contract currently at an all-time high of 833.3/1000. In the past month the CDS curve has shown a dramatic inversion, which means it is now more expensive to buy insurance against default for shorter maturities than longer maturities. Such an inversion is usually seen in small, fragile companies. (For a graphic on this inversion, please click on r.reuters.com/sys79s) Sharp also slashed its forecast to a full-year operating loss of 100 billion yen from an earlier estimate of a 20 billion yen operating profit. In mid-morning trade, Sharp shares traded at 191 yen, down 28.5 percent, versus a 1.2 percent drop in the benchmark Nikkei 225 average .N225. (Reporting by Mari Saito and Dominic Lau; Editing by Edmund Klamann and Alex Richardson) Link this Share this Digg this Email Reprints

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