Reuters: Technology News: Renesas braces for costly restructuring, shares fall 11 percent

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Renesas braces for costly restructuring, shares fall 11 percent May 28th 2012, 01:44 The logo of Renesas Electronics is seen at its headquarters in Tokyo February 8, 2012. Credit: Reuters/Kim Kyung-Hoon TOKYO | Sun May 27, 2012 9:44pm EDT TOKYO (Reuters) - Shares in Renesas Electronics fell more than 11 percent on Monday to a record low after news it will sell loss-making operations and cut at least 12,000 jobs as Japan's chip sector grapples with its biggest shake-out in a decade. The company's escalating troubles follow the February bankruptcy filing of Elpida Memory Inc, Japan's last producer of dynamic random access memory (DRAM) chips used in personal computers, which is in talks with U.S. firm Micron Technology about a buyout plan. Renesas, struggling to cope with high costs and aggressive overseas rivals such as Samsung Electronics, has presented a restructuring plan to its banks that includes cutting its workforce by more than a quarter. The plan would be funded by raising more than 100 billion yen ($1.26 billion) in fresh capital, a source familiar with the situation said. Renesas, the world's fifth-largest chipmaker, will also announce details of a business tie-up with Taiwan Semiconductor Manufacturing Co in Tokyo at 3:30 p.m. (0630 GMT). The Nikkei business daily reported over the weekend that Renesas plans to sell TSMC a chip plant in northern Japan. "If it can go through with the restructuring and raise funds, it will not be a repeat of Elpida," said Hideyuki Ishiguro, assistant manager of investment strategy at Okasan Securities. "Elpida repeated similar efforts over and over again until there was no one else who was willing to give funds. I think it is very likely that Hitachi and the major shareholders will give support, so I do think the (share) reaction today is a little excessive." Ishiguro and other analysts have said previously that the company's automotive microcontroller division is a healthy business with large market share. The capital raising is double the amount flagged in a Japanese media report last week which triggered a fall in Renesas shares to 241 yen, a record low. They have lost nearly 60 percent of their value over the past two months compared with a 15 percent drop in Tokyo's benchmark Nikkei average. In addition to its lenders, Renesas will have to submit the plan for approval by its main shareholders, electronics conglomerates Hitachi Ltd, Mitsubishi Electric Corp and NEC Corp, whose chip divisions were spun off and merged to form Renesas over the past decade. It has said it will finalize its restructuring plan by July. Renesas reported a 62.6 billion yen net loss for the year to March 31 when it was hit by a strong yen and natural disasters as well as stiff competition and weak demand in several of its businesses. Japanese media reported last week that the tie-up to be announced on Monday with TSMC was likely to involve Renesas contracting out production to the Taiwanese company. Renesas has given no details ahead of the announcement, although a spokeswoman said the company's president was not due to attend and that it would not concern an equity tie-up. ($1 = 79.6000 Japanese yen) (Reporting by Dominic Lau and Mari Saito; Writing by Edmund Klamann; Editing by Matt Driskill) Link this Share this Digg this Email Reprints

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